CEO and founder of Chinese cryptocurrency exchanges OKCoin and OKEx, Xu Mingxing is in police custody while facing allegations of fraud over what one source describes as a “little-known currency.” Mingxing – also known as Star Xu – is said to be cooperating with police and is not under arrest.

OKEx Founder

The following message was released on Twitter during yesterday’s early morning hours:

“Sina News: Star Xu, founder of OKCoin/OKEx, is being investigated by Shanghai police. According to Lu Jun, officer at the local PD, Xu was suspected of fraud accused by investors. SH police have accepted the case.”

There’s Very Little Information So Far

The accusations stem from investors of WFEECoin, who say that Xu is the primary shareholder. Xu is denying these claims, though it is unclear how or even what potential fraud may have been committed. Officers in Shanghai had originally agreed to take on the case, though now reports state that the fraud may have occurred in Beijing. Thus, the case is being moved there.

Twitter resource cnLedger explains:

“The alleged fraud was not conducted in Shanghai, but in Beijing. Therefore, documents will be handed to Beijing police.”

Does China Have a Trick Up Its Sleeve?

Surveillance photos shows Xu moving about and working with authorities. He is under a maximum 24 hold (the longest authorities can contain someone without officially arresting them), which is set to run out at approximately 10 PM local time.

The move may simply be the next step in China’s ongoing crackdown of cryptocurrency-based activities and ventures. Recently, the country outlawed all initial coin offerings (ICOs) and digital exchanges, while also banning any activities that could be deemed “promotional.” ICOs have garnered much notoriety in the cryptocurrency world after it was estimated that phony money-raising efforts may have walked away with nearly $500 million of investors’ hard-earned cash.

ICOs Are Large Havens for Fraud

Many new ventures have seemingly started ICOs in the hope of garnering capital to get their business operations started. People thereby invest in a digital coin they can use to gain access to the company’s services and/or products. However, about halfway through the project, the company seemingly disappears, and no operations ever come to fruition. It’s not 100 percent clear if these companies simply failed to raise the funds they needed to stay in business or if their intentions were malicious from the start. Either way, several investors in these ICOs have been forced to step away having experienced massive financial losses.

Fraud can also occur in much more secretive ways. When it comes to cryptocurrency, most users are now privy to the fact that virtually anything is possible.

When It Comes to Crypto, Some People Are Sneaky

Recently, it was discovered by University of Texas finance professor John Griffin that the price of bitcoin was being manipulated at the hands of those behind closed doors who were using Tether to boost the price whenever it fell. If bitcoin dropped even by a small fraction, these investors would use Tether – an alleged stable coin backed by USD – to boost the price and further its ascent on the financial ladder.

Griffin’s findings were later published in a report, and organizations like the Securities and Exchange Commission (SEC) have begun investigating the allegations behind Tether, though executives claim they’ve committed no wrong-doing, and that the currency was never used for fraudulent purposes.

We’ll Give More When We Get More

As reported by cnLedger, a preliminary investigation into Xu’s Shanghai dealings suggest that neither the entrepreneur, nor any of his businesses have any links to fraudulent activities.

Blockonomi will deliver further details regarding this story as they develop.


Nick Marinoff

Posted by Nick Marinoff

Nick Marinoff has been covering cryptocurrency since 2014. He has served as a lead content writer and news editor for Money & Tech; a public relations writer for Game Credits, and a senior writer for both Bitcoinist and News BTC.

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