Police intervene, founder takes rest, cryptocurrency exchange AEX announces suspension of all services

AEX, a cryptocurrency exchange that has been in the midst of a liquidity crisis for more than a month, has entered its "darkest hour".

On July 17, AEX Exchange issued an announcement stating that according to the requirements of the Guangxi police, it will suspend platform-related services at 15:32 (UTC+8) on July 17, 2022, and fully cooperate with the police investigation. Please wait for the police announcement in the future.

AEX's Chinese name is Anyin, and it was originally called "Bit Era". It originated from mainland China and its founder is Huang Tianwei. It is one of the longest-established medium-sized exchanges in the cryptocurrency circle.

However, as my country has cleared out virtual currency transactions and mining in recent years, "AEX" also withdrew from the Chinese mainland market in 2021 and announced a ban on IPs from mainland China.

Founded in 2013, AEX has gone through several rounds of bull and bear market transitions in the cryptocurrency circle, but the collapse of the "LUNA" project in May 2022 became the fuse, triggering a series of collapses of many crypto financial institutions, and AEX was one of them.

On June 16, AEX issued an announcement, announcing that it would suspend withdrawal services for mainstream currencies including Bitcoin and Ethereum within 36 hours, becoming the first centralized exchange in the cryptocurrency circle to announce the suspension of withdrawals in recent times.

According to AEX’s disclosure at the time, since the collapse of the LUNA project in mid-May, the total market value of various asset outflows from AEX has reached 450 million USDT (including the withdrawal of partner institutions), equivalent to approximately RMB 3 billion.

At the same time, after AEX’s funds were affected by the Luna crash in the cryptocurrency circle, its two stablecoin assets, USDC and USDT, in Curve (a decentralized financial service protocol) were affected by the collapse of UST, resulting in huge losses, but the specific amount was not disclosed.

After the news was released, AEX, which was celebrating its ninth anniversary, gave up its internal celebration and tried to reverse the downward trend.

On June 17, AEX resumed the withdrawal function, but the daily limit for each user was 500U, or $500 worth of assets. Subsequently, AEX increased the limit to $600 per day.

On June 25, AEX Exchange issued an announcement stating that after implementing the strategy of limiting the daily withdrawal limit of US$500, the cash flow was mostly swiped away by the small accounts of abnormal customers through loopholes in the rules (OTC or buy high and sell low). AEX will adjust the withdrawal strategy to "unlock the frozen assets of customers on a daily basis by currency and quota. The circulation of unlocked assets is not subject to any restrictions and can be freely traded and withdrawn. AEX will unlock customer assets based on the speed of asset reflux."

However, apart from adjusting its withdrawal strategy, AEX has not announced any news of obtaining emergency loans, short-term financing or other liquidity funds.

On July 14, according to an announcement from AEX in the official Telegram community, AEX was still trying to save itself, saying that it had encountered a liquidity crisis, but it was not fatal. According to the announcement, AEX founder Huang Tianwei tried various ways to find new funds after the crisis, slept less than 3 hours a day, and had entered a state of rest due to overwork.

During this period, AEX lost hundreds of millions of dollars in assets due to the continuous withdrawals by users of the exchange.

AEX emphasized in the announcement that it will not run away and the platform will continue to provide external services.

But three days later, according to the AEX announcement, the Guangxi police have begun to intervene in the matter, and AEX reminds users to pay attention to the police's subsequent announcements.

It is worth noting that AEX is not the only crypto financial institution that has encountered a liquidity crisis. Another crypto financial institution originating from mainland China and also engaged in exchange business, Huobi, also suspended withdrawals on June 18 and began to conduct withdrawal reviews.

In the United States, Three Arrows Capital, a well-known crypto fund that is deeply involved in the "Luna crisis", has begun liquidation of its assets. Celsius, a crypto lending institution that claims to have millions of users, also applied for liquidation this week.

The cryptocurrency crisis that broke out in May has caused the entire cryptocurrency market value to evaporate hundreds of billions of dollars. This collapse has exposed the liquidity risks of more cryptocurrency institutions that are deeply involved in it, and AEX is not the last one.

As of press time, the price of Bitcoin has re-crossed the $21,000 mark, the price of Ethereum has also risen to $1,300, and the total market value of cryptocurrencies has returned to around $1 trillion.