FCoin Collapses
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Whether people want to call something poor auditing or an exit scam, the end result is that investors lose their funds. Any model which deals with partial reserves, or is unaware of the reserve level, is subject to this risk. China (just like Canada) lacks any sort of solid regulatory framework for exchanges at all. It’s only fitting we should see yet another exchange collapse while I’m in the midst of writing this post.
This exchange or platform is based in China, or the incident targeted people primarily in China.
About FCoin
“Less than two years after bursting onto the scene, Chinese crypto exchange FCoin has shut down its operations. The platform, founded by Zhang Jian, also says it may be unable to pay the 7,000 to 13,000 Bitcoin (BTC) — about $67 million to $125 million — that is owed to its customers.” “While FCoin was pulling in large transaction volumes, the back-end architecture that ought to prevent any abuse of the system was not yet in place.” “poor back-end controls on the exchange meant that some users were receiving fee reimbursements in excess of the stipulated amounts prescribed by the model.”
This exchange or platform is based in China, or the incident targeted people primarily in China.
The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.
Include:
- Known history of when and how the service was started.
- What problems does the company or service claim to solve?
- What marketing materials were used by the firm or business?
- Audits performed, and excerpts that may have been included.
- Business registration documents shown (fake or legitimate).
- How were people recruited to participate?
- Public warnings and announcements prior to the event.
Don't Include:
- Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
- Anything that wasn't reasonably knowable at the time of the event.
There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.
The Reality
This sections is included if a case involved deception or information that was unknown at the time. Examples include:
- When the service was actually started (if different than the "official story").
- Who actually ran a service and their own personal history.
- How the service was structured behind the scenes. (For example, there was no "trading bot".)
- Details of what audits reported and how vulnerabilities were missed during auditing.
What Happened
The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.
| Date | Event | Description |
|---|---|---|
| February 1st, 2020 12:01:35 AM | First Event | This is an expanded description of what happened and the impact. If multiple lines are necessary, add them here. |
Total Amount Lost
The total amount lost is unknown.
How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?
Immediate Reactions
How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?
Ultimate Outcome
What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?
Total Amount Recovered
It is unknown how much was recovered.
What funds were recovered? What funds were reimbursed for those affected users?
Ongoing Developments
What parts of this case are still remaining to be concluded?
Prevention Policies
When countries and governments prevent legitimate entities from operating exchanges, the result is a market void that is often filled with criminals. Where identities of operators are known and the funds are stored in a proper multi-signature wallet, a situation where one party takes the funds has never happened. You can also be certain that there was no auditing happening, and the exchange likely hadn't contemplated any hot wallet contingencies.
References
FCoin Blames Poor Auditing for Shutdown, but Others Suspect Exit Scam (Feb 21)
SlowMist Hacked - SlowMist Zone (Jun 25)