FCoin Community Committee Suggests a Debt for Equity Swap to Restart the Exchange
Chinese cryptocurrency exchange FCoin’s community committee suggests the platform founder to consider the possibility of debt for equity swap like the case of Bitfinex, adjusting platform fees, or run FM FJP independently to cope with its current crisis.
FCoin community said it had an in-depth communication and reached a preliminary consensus with the exchange’s founder regarding the restart of FCoin. The community is currently actively promote it and claims further statement will be made regarding the progress when there’s an update.
On Monday February 17, FCoin founder Zhang Jian published a lengthy post revealing that the exchange is unable to pay 7,000 to 13,000 BTC (approx $125 million) back to its users as a result of shortfall in the platform’s assets, claiming that FCoin’s troubles is neither an exit scam or a hack but a series of data and decision errors.
Zhang also stated that he would soon launch a new project and profits from the venture will be used to reimburse FCoin’s customers who suffered losses based on a remediation plan to be revealed in the future. This long-term repayment plan could last for between one to three years.
In the letter to FCoin team from its community committee which was circulated online, the committee said that they are the exchange’s strongest support and FCoin should actively seek help from them instead of seeking outside help.
In face of the current crisis, the committee suggests the FCoin team to follow the example of exchange Bitfinex which was hacked nearly 120,000 bitcoins (approx $65 million at the time) in August 2016 and came up with a reimbursement plan of issuing Bitfinex tokens (BFX) that served as a form of equity obligation to customers.
Despite the fact that Bitfinex finally came through it after completing reimbursing its customers following the debt-to-equity measure in less than one year, the case of FCoin is more complicated.
After FCoin’s launch in mid 2018, the exchange’s reported trading volumes became some of the largest in the world overnight with a new business model called “transaction mining.” Later it was reported by one Redditor that this volume was actually faked. The FCoin order book appears to be crawling with bots. “The price of FT is constantly manipulated,” wrote one Redditor, who also described the exchange as a scam. Binance’s CEO Changpeng Zhao has also called FCoin a Ponzi scheme.
According to observations by China-based blockchain security firm Chainsguard, the total number of BTC in FCoin cold wallets has shown a downward trend after reached the peak of 11,509 BTC on July 22, 2018, the outflows from cold storage lead to implication that it is an exit scam.