IDAX, the Chinese exchange that was last week under pressure to explain issues with user withdrawals, is on the verge of closure after admitting that user funds have been locked down following the disappearance of its CEO, Lei Guorong. The news comes after a recent crackdown on Chinese crypto entities by authorities in Shanghai, which has led to many putting the two facts together to suggest that Guorong has gone on the run to avoid law enforcement.
Withdrawals Locked Down
Issues with the exchange were first reported over a week ago when users began experiencing problems with withdrawals, stating that requests were being delayed or ignored completely. This led to IDAX issuing a statement on the 24th explaining that it was experiencing the crypto exchange equivalent of a bank run:
This run on the exchange led to an explosion of rumors, and it didn’t take long before suggestions arose that Guorong had absconded and taken sole access to the exchange’s funds with him. The rumors built to a fever pitch before IDAX finally confirmed the truth late last week:
This damning admission that the CEO has “gone missing” and the recommendation that “you refrain from using our all platform services” is nothing short of sensational and is reminiscent of the QuadrigaCX scandal that hit at the start of the year, with the main difference being that IDAX’s cold wallets have gone into lockdown to protect user funds rather than the CEO taking them with him. Clearly IDAX staff are as much in the dark as the rest of the community, but it is clear that the business cannot continue in its current capacity. What happens from here however is a very difficult and delicate situation, with user funds the priority.
China Crackdown to Blame?
The reasons for Guorong’s sudden disappearance have naturally also been debated within the crypto community, with the link to China’s recent crackdown on crypto exchanges in recent weeks postulated most widely. Indeed, on the same day that the exchange announced the heightened withdrawal activity they also released a statement saying that they could “no longer serve users in China due to policy reasons.” The suggestion therefore that the whole episode is related to the crackdown has some validity, and it would therefore not be surprising if his disappearing act is the last we see of Lei Guorong and IDAX.