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Crypto exchange FCoin, which was founded by former Huobi CTO Zhang Jian, has paused withdrawals and deposits on its platform as its capital reserve fell short of its liability – with the amount standing somewhere between 7,000 and 13,000 bitcoin ($68 million to $130 million approximately), CoinDesk reported.
Jian penned a lengthy post on Monday on its site in Chinese explaining that the exchange could no longer process the users’ withdrawal demands.
“The biggest problem that FCoin currently faces is not the problem that the system cannot be restored, but the problem that the capital reserve cannot be paid by users. 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 7000-13000 BTC,” the announcement read after it was translated in English on Reddit.
Zhang added that errors in data and poor decisions have brought them to the current position. “This is a problem that is a little too complicated to be explained in a single sentence,” he continued.
For a long time, there was an error in the FCoin system that started to give away transaction-based mining rewards to users way more than what they should have actually received. With the problem identified "too late," it had already grown too large.
However, the team still tried to tackle the situation and started to buy back FT tokens despite its downturn in hopes of increasing the buying demand for the token’s price. However, their strategy didn’t work and Zhang considered it one of the “decision errors” on their end.
Together, these errors led to a significant loss of FCoin's assets on its own balance sheet. Zhang said that he will now process withdrawal requests from users sent via email.
"At present, all mail withdrawals are handled by me, so the efficiency is very low. Mail withdrawal processing will be divided into two phases, the current phase and the long-term phase. I expect the current mail withdrawal process to take 2-3 months," he wrote.
He further revealed that he has decided to switch track and start all over again. Zhang promised to compensate everyone for their losses and will begin long-term mail withdrawals but only after his new project is on track which may take 1 to 3 years.
Meanwhile, Hong Kong-based blockchain remittance startup Bitspark and South Korean crypto wallet Bitberry have both announced that they are officially shutting down their services. Bitspark will terminate its services on March 4 while Bitberry will only operate until Feb. 29.
