Controversial Chinese cryptocurrency exchange FCoin has reiterated that its recent and surprising shutdown was nothing nefarious and was rather a series of data and decision errors — specifically concerning proper auditing of the payouts of the platform’s transaction mining model.
FCoin came onto the exchange scene quite dramatically under two years ago when the exchange started reporting large trading volume that was outstripping some of the largest and most well-established exchanges almost overnight. This was achieved by a business model they called ‘transaction mining’ which appeared to spout out fake volumes.
The sudden closure also came with concerns as the platform, founded by Zhang Jian, says it may be unable to pay the 7,000 to 13,000 Bitcoin (BTC) — about $67 million to $125 million — that is owed to its customers.
Despite this, and against the accusations of hacks and exit scams, the FCoin founder has now laid out his side of the story stating that nothing nefarious has gone on.
A skeptical start, and end
FCoin caught a lot of attention when it began thanks to a novel business model called “trans-fee mining.” This new development took the concept of exchange tokens to another level by reimbursing users with a percentage of the transaction fees received by the platform.
This was met with much skepticism, including from Binance CEO who tweeted:
“I rarely called out anyone, with exceptions. On Chinese social media, I called FCoin a pyramid scheme in mid-2018. Their founder calls his own plan a “better invention than #Bitcoin”. That did it for me. Who would say such a thing? About themselves? Except scammers,” he recently tweeted.
Even with all this, the founder of the exchange maintains FCoin’s demise was neither due to a hack or an attempted exit scam. Instead, the former Huobi CTO blamed a series of data and decision errors — specifically concerning proper auditing of the payouts of the platform’s transaction mining model.
“The internal problems and technical difficulties we face are the result of financial difficulties. It is expected that the scale of non-payment is between 7,000–13,000 BTC,” he wrote in a post.
Ineptitude is just as inexcusable
If the founder is to be believed and there was no hack, or exit scam, the FCoin is still an example of the poor business processes that are allowed to flourish in the cryptocurrency space. The ineptitude that led to the closure of the exchange, and the loss of many investors’ money means there is still a massive Wild West aspect to the industry that needs to be stamped out.