This Crypto Exchange Went Dark After $56.5M Outflow

Hong Kong-based cryptocurrency exchange BitForex has stopped all withdrawals for at least three days, leaving users puzzled and worried about the safety of their assets.

This incident was revealed when blockchain sleuth ZachXBT flagged suspicious activity on the platform, sparking fears of a potential exit scam.

Exit Scam Suspicions and Halted Withdrawals

ZachXBT, in a post dated February 26, expressed concerns about potential irregularities involving BitForex, suggesting the likelihood of an exit scam.

They pointed out a significant outflow of around $56.4 million from the exchange’s hot wallet on February 23. Following this substantial withdrawal, the exchange suspended all withdrawal operations, causing concern among its user community.

Seeing some suspicious activity with the crypto exchange @bitforexcom.

On Feb 23 their hot wallets saw outflows of ~$56.5M. Shortly after this time withdrawals stopped processing with no official announcements having been made since.

Currently users are asking questions on… pic.twitter.com/gFEcwExHKh

— ZachXBT (@zachxbt) February 26, 2024

Adding to the suspicion, ZachXBT noted that questions on various platforms, including X and BitForex’s Telegram channel, have yet to be answered by the exchange’s team.

He also pointed out that BitForex still holds significant amounts of TRB and OMI tokens, with 18% and 7% of their total supply, respectively. The investigator has also identified specific wallets linked to the suspicious activity.

The timing of these developments is particularly concerning, given BitForex’s recent change in leadership in January that saw CEO Jason Luo step down. While Luo expressed confidence in the new leadership team, the circumstances of his departure have only fueled speculation.

Meanwhile, users have reported various issues on the exchange’s official Telegram channel, including difficulties accessing their accounts, missing assets on the dashboard, and login difficulties.

A user who contacted ZachXBT mentioned that administrators in the BitForex Telegram group initially attributed the issue to ongoing maintenance. However, the user reported that the administrator has since changed their username and stopped communication, leaving users unable to contact anyone from the exchange.

Other users have also reported being blocked from accessing the company’s website. When one tries to access the official BitForex website, they are met with a pop-up message stating they are blocked from accessing the site.

BitForex Under Regulatory Scrutiny

Established in 2018, BitForex has previously come under regulatory scrutiny. Last year, Japan’s Financial Services Agency issued a warning letter, flagging BitForex, among other exchanges, for operating within the country without proper registration, violating the local fund settlement laws.

BitForex’s exchange policy does not mandate the provision of Know Your Customer (KYC) details for account creation, raising additional concerns regarding the potential for money laundering and illicit activities on the platform.

Despite repeated attempts to seek clarification, BitForex has yet to issue any public statements addressing the recent developments or addressing its user base’s concerns.