Reports are surfacing that Xu Mingxing, founder of OKEx, is in talks with Shanghai police over his alleged involvement with little-known, and possibly fraudulent, crypto startup WFEECoin. He is cooperating with police and is not currently under arrest.
Worry at the OKEx Helm
It bears repeating. Crypto is a very young market. Impossible success stories, wild dreams of futuristic use cases, and a lot of scams. So many scams, so much wash trading, and so many shady business practices.
The world’s (maybe) second largest crypto exchange
OKEx, founded in 2014, is regularly listed as the world’s second largest cryptocurrency exchange by volume. In an article on wash trading last week, we noted that the exchange’s trading volume is very likely more than 90% fake, putting OKEx in 8th position instead of 2nd. Though 8th is not bad in its own right, this is of course not a reputation any exchange should want for itself, but then false claims of high volume can often lure in real traders, and real volume, so many exchanges are willing to risk getting caught if it means a better chance to become popular eventually.
It is not allegations of wash trading that are the cause of Mingxing’s legal troubles, however (Though that’s illegal in most places too). It is his alleged relationship with the little-known project and possible scam WFEECoin. So little known is the project that we have had difficulty learning much about it – it appears to be promising a decentralized wifi sharing platform.
Beyond that, all we know is that it has only 174 members in its Telegram channel, which offers airdrops of tokens in exchange for spreading the word on social media. The investigation was sparked by allegations of fraud by investors in the project.
Cooperating with Police
Shanghai police asked to talk with the OKEx founder today, apparently in the belief that he is one of the shareholders of the suspicious project. Mingxing denies this connection, but law enforcement remains unconvinced. They have asked him to prove he is not a shareholder – which is somewhat troubling from a civil rights perspective, but then this is China.
Mingxing is not under arrest and appears to be cooperating to the satisfaction of Shanghai police. Should he be arrested, it is unclear what consequences that would have for the world’s (maybe) second largest crypto exchange. Considering the obscurity of WFEECoin, it cannot have been a very successful scam, if scam it was. We certainly have to hope that a top ten exchange is not brought down because its founder was caught pickpocketing local investors with a fraud ICO.