Chinese cryptocurrency exchange FCoin may not be able to pay back around 7,000 to 13,000 BTC (around $67 million to $125 million) to its users as the platform went default.
In a tell-all blog post titled “FCoin Truth,” the exchange founder and the former Huobi CTO Jian Zhang said the default was triggered neither by external hack nor scam, but a “data error” and a “decision error.”
“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 results of financial difficulties,” Zhang wrote in the post.
The founder said he will continue to handle withdrawal requests via email and expect the process to continue for 2 to 3 months. Meanwhile, he is planning to start a new project and pledged to use profits from the project and his personal funds to cover FCoin users’ losses.
“I will be responsible for this till the end of my life,” said Zhang.
Launched in May 2018, FCoin was able to quickly accumulate eyebrow-raising volumes through a new business model named “trans-fee mining.”
Under the scheme, FCoin issued FT tokens and distributed 51% of them publicly by reimbursing transaction fees. Users were incentivized to transact as frequently as possible since the platform reimbursed 100% in FT tokens of the transaction fees they paid. 80% of the exchange’s daily revenue from transaction fees were then paid back to users.
At one point in June 2018, around a month after the exchange went live, CoinDesk reported that its daily trading volumes hit over $5.6 billion, overshadowing the Top 10 exchanges on CoinMarketCap at the time.