A man was cheated by trading cryptocurrencies on OKEx, and the police accepted the case as a fraud case

The cryptocurrency world is full of struggles between bankers and leeks

On February 9, 2018, Mr. Zhao discovered a newly issued currency "CBT" on OKEx. At that time, he noticed that its market price was 0.4 yuan and the transaction method was currency-to-currency trading, that is, CBT against USDT.

According to the query on the OKEx platform, CBT’s full English name is Commerceblock, the project’s jurisdiction is in Gibraltar, its investors are Global Advisors and Coinshares, and it has been applied in hedge funds and real estate industries.

OKEx is a world-renowned digital currency exchange, originally founded by OKcoin founder Mingxing Xu.

"This currency is only available on OKEx. During that period, new coins listed on the exchange would basically increase in price. I had always lost money in contract trading before, so I wanted to change my mindset." Mr. Zhao told Phoenix Technology that he originally planned to buy a batch of CBT and wait until the price of the new coin rose after listing before selling it.

At 4 p.m. that day, CBT began to be listed for trading. Mr. Zhao opened the OKEx website and placed a market order with a total value of $1,547.98.

Screenshot of Mr. Zhao's market order

The so-called market order, also known as market entrustment, refers to an order to buy or sell a certain number of foreign exchange contracts in a specific delivery month immediately (as soon as possible) at the best price possible at the time. This order does not specify the specific transaction price, but only the number of contracts in the delivery month.

That is to say, the moment Mr. Zhao places a market order, the transaction will occur as soon as possible. At the moment the transaction occurs, the price will not be an influencing factor.

"When I placed the order, they hadn't placed any sell orders yet." However, what Mr. Zhao didn't expect was that at 4:01, an order for $19,999 immediately appeared. This selling price was nearly 320,000 times the market price.

CBT price trend after listing

"I wanted to cancel the order when I saw the price, but it was too late." Mr. Zhao had a bad feeling and immediately called the customer service of the OKex platform, but the reply he got was "This is a market behavior and we have no right to intervene."

"This transaction may have occurred because the new coin had just been listed, and the seller intended to sell it at a price higher than the market price of $19,999. Mr. Zhao may not have noticed the price at the time and placed a buy order on the market, resulting in the transaction being completed automatically," an expert in the field of digital currency trading analyzed.

Fortunately for Mr. Zhao, his loss was not that great. "I lost more than 10,000 yuan, but I can't swallow this breath, and I don't want others to be deceived again." In Mr. Zhao's opinion, the user may have reasons for this incident, but OKex still lacks risk control capabilities. "Who has seen a newly issued coin rise 320,000 times compared to the issue price?" Mr. Zhao was very angry.

Mr. Zhao could not accept the customer service's explanation. After the transaction was completed, Mr. Zhao looked at the market price of CBT and it was still 0.4 yuan per piece. In other words, if Mr. Zhao placed a market order to buy 1 CBT, then in just a few minutes, the 19,999 US dollars would become 0.4 yuan (RMB). Mr. Zhao's 1,547.98 US dollars instantly became 0.3 yuan, and he held 0.77 CBT.

This made him even more angry and puzzled. He immediately asked OKex to freeze the issuer's account to prevent further losses. However, the platform still refused on the grounds that "this is a market behavior and we have no right to intervene."

This is not the first time that a similar incident has occurred on the OKEx platform.

Since September last year, hundreds of investors have claimed to have encountered "abnormal liquidation" incidents on the OKEx platform.

Among them, in the "330 liquidation incident" that is well-known in the cryptocurrency circle, OKEx could not bear the external pressure and carried out a rare transaction "rollback". This move was believed by the outside world that OKEx could change the background data at will.

Confused buyers and confusing platforms

Mr. Zhao is a microcosm of many cryptocurrency buyers who see virtual currencies as investment opportunities.

In the first half of 2017, Mr. Zhao learned from chatting with several friends that the price of virtual currency has been rising. 2017 is a very important year in the history of Bitcoin development, with an annual increase of up to 1,700%. The price of ETH also easily exceeded 10,000 yuan at the end of 2017.

The bull market in the cryptocurrency world has injected stimulants into many people’s dreams of getting rich overnight.

"I don't know what blockchain is, but I know about the cryptocurrency world," said Mr. Zhao, who first traded on a platform called Bitstar. It's a very small trading platform, and because there are too few people, transactions are often difficult to reach.

Later, Mr. Zhao heard about the OKEx platform. "I heard that it is quite large and there are many big names supporting it. We all think it is good." However, Mr. Zhao did not expect that many "abnormal events" would occur on the OKEx platform afterwards.

On the afternoon of March 20, 2018, several users who purchased digital currency futures on OKEx gathered for the third time at OKCoin, Building 3, Shangdi Qunying Technology Park, Haidian District, Beijing, to seek an explanation. They all said that OKEx not only did not have the qualifications of a futures exchange, but also was suspected of manipulating transactions, and that frequent liquidations had caused them to be "double-killed by longs and shorts."

Many users have also suffered account thefts before. On September 30, 2017, several users’ accounts on the OKEx platform were hacked, and hundreds of bitcoins in their accounts were all transferred away in just a few hours. According to preliminary statistics, nearly ten users have reported that they have lost dozens to hundreds of bitcoins, with a total of about 600 bitcoins, worth about RMB 20 million.

In addition, OKEx is also deeply involved in incidents such as "trading is restricted when the price is high after placing an order, and trading is allowed when the price is low" and "unplugging the network cable to hinder trading".

Illegal futures or scam?

Finally, Mr. Zhao, who had nowhere to complain, reported the case to the local police station under the name of "illegal futures".

Mr. Zhao's reasons are: first, OKEx does not have the "futures product operating qualifications" granted by the China Securities Regulatory Commission; second, Mr. Zhao believes that this abnormal liquidation incident was manipulated by the OKEx platform.

In response to this incident, professional analysts pointed out that virtual currency transactions are inherently extremely risky. Whether it is OKEx or any other trading platform, the trading website clearly puts risk warnings. The virtual currency market does not have price limits, and trading is open 24 hours a day. Due to the small number of chips, the price is easily controlled by the dealer. It is possible that the price will rise several times in one day, and it is also possible that the price will fall by half in one day. When participating in virtual currency transactions, users should control risks on their own and evaluate the investment value and risks of virtual currency.

"But it is abnormal for a coin to increase hundreds of thousands of times in a short period of time. Such an incident should not happen on such a large platform. This is a blatant scam." According to Mr. Zhao's feedback, the CBT he purchased now has a market price of less than 0.2 yuan per coin, and the CBT he purchased before is now worth only 0.14 yuan.

Some time after he filed the report, the local police station contacted Mr. Zhao and said, "Other people have also reported the case to other public security agencies, and the cases will be handled together." Mr. Zhao then went to the police station again to record his statement, and later received a receipt of the case. "The police have classified this case as (suspected) fraud. The issuer must bear criminal responsibility, and OKex as a platform cannot escape responsibility," said Mr. Zhao.