- After months of silence, BitForex said it plans to return user money "soon."
- Staff were detained and investigated in China, the firm said.
- CEO's departure raised numerous questions.
Five months ago, the cryptocurrency exchange BitForex vanished, its social media profiles went silent, and $57 million in user funds were transferred to a new wallet.
Last Friday, BitForex reemerged and claimed its absence was due to a police investigation in China’s Jiangsu province. The company said that staff members had been detained.
BitForex announced that users would “soon” be able to withdraw their assets, although the platform will not resume trading. The exchange said it will not accept new user registrations or deposits.
“We understand that this incident has caused significant inconvenience and distress to our users, and we sincerely apologise for this,” the company stated. “We are making every effort to ensure the safety of user assets.”
Significant distress
The disappearance has indeed caused significant distress. The company’s operations, like many in the crypto industry, have been shrouded in ambiguity.
In February, BitForex initially attributed its downtime to “unscheduled maintenance,” which does not align with the later revelation of police detentions.
But from the start, there were rumours that authorities in China had detained someone.
According to a person with knowledge of the situation, Chinese authorities believed BitForex was conducting cryptocurrency exchange operations within China.
BitForex’s former CEO, Jason Luo denied this was the case, according to the same individual.
Detained
Instead, Luo said that employees were working from Singapore and had returned to China for the New Year holidays when they were detained. He said he was making efforts to sort out the situation and hiring lawyers.
But Luo’s own connection to the exchange is unclear. He stepped down as CEO just weeks before BitForex went offline.
His sudden departure added to the uncertainty. The exchange has not confirmed if he was among those detained.
Tracing BitForex
The investigation in Jiangsu itself raises several questions. BitForex has not previously disclosed any links to Jiangsu, a coastal province just north of Shanghai.
The company has not specified who was detained, their roles, or the number of staff involved. BitForex’s LinkedIn profile indicates it employs between 51 and 200 people.
BitForex also claimed to be headquartered in Hong Kong. While it is a registered company in the city, it does not appear to have a working office.
Addresses on business registry documents and press releases lead to virtual address services.
In March, the Hong Kong Securities and Futures Commission designated BitForex a suspicious platform and said it was “suspected of engaging in fraudulent activities.”
As of May 9, police in Hong Kong were still enquiring into BitForex’s activities.
Despite repeated attempts by DL News to obtain updates, Hong Kong police have not provided any further information on their investigation into BitForex.
There was no response to messages sent to BitForex’s email and telegram accounts, as well as to Jason Luo.
Multichain case
Despite the risk of running and working for cryptocurrency projects while inside China, the practice remains common.
China-based staff are more affordable option for companies based in Hong Kong and Singapore. Chinese citizens who wish to work in crypto can easily set up a company abroad but continue operations in the country.
In May 2023, founder and CEO of Multichain, Zhaojun He was arrested in Kunming in southern China. His whereabouts remained a mystery for months.
Multichain was later hacked on July 7 for $125 million. His sister tried to transfer the remaining money into wallets she controlled and was taken into custody on July 13.
Got a crypto story? Get in touch with DL News’ Hong Kong correspondent at callan@dlnews.com
