On 16 October, OKEx suspended withdrawals on its highly popular exchange platform, creating huge media waves as speculators wondered if the exchange was being shut down, or was becoming insolvent. We set out to uncover what does OKEx withdrawal halt mean for users.
When exchanges halt withdrawals, it is usually in response to a major market event, service disruption or malicious activity against the exchange. Exchanges such as OKEx are centralized, meaning that users have to leave tokens in the custody of the exchange in order to trade; this often means that the tokens are at risk from various attack vectors that could compromise user funds and result in the exchange being unable to fulfill withdrawals.
OKEx’s announcement that withdrawals would be halted did not have many details; it quoted that the halt was due to involvement by a “public security bureau” with one of its private key holders, which prevented him from communicating with OKEx. Chinese media Caixin reported that said private key holder is Xu Mingxing (also known as “Star” Xu), a tycoon who has a hands-on management style for the company’s finances and co-founder alongside Jay Hao, who is the CEO of OKEx.
No Major Suspicious Activity Found Prior To The Withdrawal Halt
Unlike the recent hack of another major exchange, KuCoin, in late September, there were no suspicious transactions or significant outbound activity associated with the OKEx withdrawal halt. Nonetheless, users have been quick to jump in and say that the withdrawal halt could be the first step of an exit scam, as common with many shady exchanges that have perpetuated such actions in the past few years that cryptocurrencies have been popular.
The stereotype driving these rumors is that many of these scam exchanges often have their roots in China, where cryptocurrencies are extremely popular and where most of the largest centralized exchanges in the world originated from.
Even putting the issue of a potential exit scam aside, many have been quick to point out the ambiguity of the announcement; the private key holder in question was not named, and the suspension of withdrawals was justified by a clause in their Terms of Service with no further explanation given. Although withdrawals are not available, other functions such as deposits and trading are fully available leading more to wonder what does OKEx withdrawal halt mean for users.
Are OKEx User Funds At Risk?
OKEx is affiliated and closely related to OKCoin, one of the earliest Chinese exchanges. It later moved its headquarters to Malta in 2018, a move that many other exchanges also did following public support by Malta for blockchain initiatives and bid to become the industry leader for blockchain businesses.
Since then, OKEx has remained one of the top cryptocurrency exchanges in the world, at various points in its time being a top three exchange by volume, alongside exchange giants such as Binance, Huobi, Coinbase and Bithumb.
What Does OKEx Withdrawal Halt Mean For Users?
Although the announcement by OKEx is worrying for users and is likely to have a long term impact on OKEx’s reputation, there is no indication that user funds have been stolen or removed. With Xu Mingxing being such a major public figure with many other ventures and investments, it is unlikely that it would be easy for any OKEx funds to be involved in a public-style exit scam.
However, withdrawal halts may also indicate other issues, such as loss of private keys which may permanently incapacitate the associated funds and prevent future withdrawal. The issue has brought to light concerns with the key management processes and centralized systems used by exchanges; the recent arrest of one of the BitMEX founders raised similar concerns, as his arrest meant that the withdrawal protocol was missing one potential authorized signatory to proceed. While OKEx has not released any further information on the subject, it would be prudent for users to not send in any funds into OKEx for the foreseeable future.
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