Chinese exchange FCoin has shut down amid fears that the company was nothing more than a Ponzi scheme, which has left users millions of dollars out of pocket.
The news came out yesterday via a blog post in Chinese from FCoin’s founder Zhang Jian who told users that they can not pay back the 7,000-13,000 BTC ( $67 million to $125 million) that they owe them.
The reason for the closure is unclear and Zhang failed to give a reasonable explanation or many more details, only stating:
“This is a problem that is a little too complicated to be explained in a single sentence, the time span is also large, and the two-story development lines are advancing and affecting each other at the same time, leading to the final outcome.”
Setting up in May last year, FCoin was riding a wave of support and investment, due in part to their so-called transaction mining model, which saw their trading volumes skyrocket almost overnight.
Yet many people began calling out the suspicious data readings, citing manipulation. Other questions were also asked about the business and how it paid off its customers. Users would be fully reimbursed for transaction fees should they use FCoin’s native token, something that would appear odd if they were an exchange looking to make legitimate money. It all seemed too good to be true, which lead many to believe it was a scam.
Not only that but the system used by the company also had major problems. These internal problems were something that Binance’s CEO, Changpeng Zhao, who had called out FCoin in 2018 for being a pyramid scheme pointed too. He said:
‘With the deepening of the investigation, we found a large number of existing data problems of dividends and mining returns, and these problems have existed for many days. As a result, a large number of users have already been through operations such as buying and selling various currencies and withdrawing cash, causing the pollution of assets.”
Now, it seems it was these internal issues that reportedly forced them to shut down the operation four days ago. Yet, many believe this is an elaborate cover and that Zhang’s blog post is even more smoke and mirrors, despite his promises that he will personally reimburse users affected.
Zhang has reportedly left China and with the exchange registered overseas, it will be difficult for Chinese users and authorities to bring them to justice.