Crypto Exchanges Experience Nightmare Week

Bitcoinist November 6, 2019
Updated 2019/11/06 at 9:46 AM
5 Min Read

Crypto exchanges are having a gruesome week, as a growing number of platforms face sudden closures, multi-million dollar hacks and fierce lawsuits. Here’s a breakdown of all the latest exchange action.

Last week saw several incidents related to crypto exchanges, further showing that even in 2019, trading crypto holds unforeseen risks. Certainly, exchanges are the key to making prices tick, but are also the hotspots for outrageous messes. Last week saw much more than the BitMex email leak, with several hair-raising events linked to exchanges big and small.

Closures: DX Exchange, Golix, BC Exchange, Einstein Exchange

Last week saw several markets throw in the towel. Lowered altcoin volumes, more complex regulations, and a concentration of funds on larger markets precipitated the death of smaller markets.

DX.Exchange at least closed in an orderly manner, offering a period to withdraw funds. The reason for the closing were rising operational costs related to security and legal transparency. The crypto exchange is now seeking a partner to buy it out and salvage its business.

Important announcement from – check our latest blog post at:

— DX.Exchange (@DXdotExchange) November 3, 2019

The Golix crypto exchange, based in Zimbabwe, presented a more dramatic story. The exchange’s owner claimed he lost passwords to the cold wallets, thus getting locked out of the exchange’s entire haul. Luckily, the loss was just 33 BTC, but it raised the spectre of exit scams.

Tawanda Kembo, the founder and CEO of the Zimbabwean cryptocurrency exchange Golix, claims to have lost the password to one of the exchange’s #Bitcoin (BTC) cold wallets.

— Nilanjon (@Nilanjon1) November 3, 2019

The “lost password” excuse looks suspiciously like the one for QuadrigaCX, the now defunct Canadian crypto exchange which turned out to lose thousands of BTC after the CEO mysteriously passed away.

And then there was the Einstein Exchange, with its missing founder Michael Gokturk. The exchange already showed signs of distress, with users complaining of difficulties reaching their assets. The exchange was seized and handed to a temporary overseer by the British Columbia Securities Commission. Curiously, the Canadian exchange had a bad reputation for months, though it managed to survive QuadrigaCX by almost a year.

SIM-Swapping, Crypto Manipulation and Lawsuits

Exchanges and their transgressions made some traders choose the litigious path. One crypto trader, who fell victim to a SIM-swap attack, decided to sue Bittrex for $1 million. Plaintiff Gregg Bennet is suing Bittrex for the loss of 100 BTC, stating the market operator failed to follow security standards and allowed a withdrawal.

The FTX exchange, a small derivatives market, is also facing a class-action lawsuit for allegedly manipulating the crypto market with the attempt to cause liquidations on the Binance futures exchange. Alameda Research, the parent company of FTX, claimed the lawsuit was frivolous and unfounded.

Crypto Exchanges Spin Off US Traders

A series of exchanges are facing a predetermined, but still dramatic move: spinning off their US traders to a local partner. Binance has already ahead of the curve, completing the process by October. But Huobi Global has warned US traders to close positions and withdraw funds until November 13. Poloniex and Bittrex are also reorganizing their business to serve regions with more crypto-friendly regulations.

The stricter regulations mean liquidity and risk-taking are more limited, and smaller and less popular altcoins saw their activity dry up.

Exchanges are constantly changing up their activity. After the altcoin boom passed, market operators had to find other sources of revenues. Crypto-based lending, staking, and futures markets have picked up the slack for the most adaptable teams. But smaller market operators remain at risk, and expose traders to the risk of never seeing their BTC again.

What do you think about exchange risks in 2019? Share your thoughts in the comments section below!

Images via Shutterstock, Twitter @DXdotExchange @Nilanjon1

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