FCoin CEO Zhang Jian has admitted convincing employees to use their “entire income” to buy up the exchange’s FT Token in order to resurrect it after it plunged 95% shortly after launch in 2018. The admission is one of several explosive revelations made by Zhang after the exchange was found to have a black hole in its accounts up to $127 million in value and was bankrupt.
From Maintenance to Bankruptcy in a Week
FCoin, the self-styled “better than Bitcoin” exchange, made its announcement yesterday after a week of highly suspicious events starting with scheduled maintenance on February 10. Following Zhang’s statement, it is clear that the enterprise was in fact doomed from the start as it failed to deal with the early success of its trans-mining program – a system that Binance CEO Changpeng Zhao labelled “disgusting” in 2019.
FCoin announced a “system upgrade” on February 10, which was extended through to the 13th after the exchange supposedly “lost contact” with key personnel. Withdrawals were suspended during this time but reopened in part on Friday, with requests being processed “every 2-3 days”. The exchange was clearly experiencing extreme difficulties by this point, but users had to wait until yesterday to hear the truth that the exchange was insolvent.
A lengthy Reddit post entitled FCoin Truth revealed why the operators had been behaving oddly for the past week:
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.
This stunning admission, which was summarized as being “neither an external hacking or an internal volume run, but a data error + a decision error”, seems to have been caused by an inexperienced team who suffered from the volume of work required early on by the platform’s design. Zhang even admits to convincing colleagues to buy the FT token with their own money after it plunged 95%, such was his desperation to keep it afloat.
The result is that FCoin has somehow lost up to $127 million of users’ BTC (the fact that they don’t know exactly tell you all you need to know), and customers will be lucky if they see anything more than a fraction of it back.
Zhang Plans to “Start Again”
Zhang complains about being “really tired”, adding that “there are too many stories about FCoin” to fit in an article, and that a book is needed to cover everything. He has also, incredibly, decided to “switch tracks and start again”, apparently endeavoring to use his “personal new project profits to compensate everyone for their losses.”
Don’t hold your breath, folks. We’ve heard this one before.