WEX crypto exchange users petitioned Binance to freeze WEX funds

Posted: 31 October 2018 6:17 pm
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The call came from inside the house.

WEX is an interesting exchange for many, many reasons.

It's the rebranded, jurisdiction-hopping rebirth of "known criminal hub" and Mt. Gox heist recipient BTC-e, whose founder Alexander Vinnik was later arrested in Greece for cryptocurrency-related offenses. Greece was quickly subject to competing extradition requests for Vinnik from the United States and Russia, but opted to hand him over to France instead. This sparked a minor international incident with Russia posturing at Greece and promising not to "leave these actions unanswered."

With Vinnik behind bars, the BTC-e exchange was raided and shut down. Two months later, it came back to life as WEX, reportedly under the ownership of one Dmitry Khavchenko, a Russian soldier in Ukraine who is believed to have been involved in the shooting down of passenger flight Malaysian Flight 17 over Ukraine in 2014, killing 283 passengers and 15 crew.

"There will be no more secret owners. I decided to become a cryptomillionaire," he reportedly said to Russian media outlet RBK, explaining that he intended to transfer the company headquarters to Crimea and register the company in Ukraine. Other partners involved in WEX are also reportedly connected with the illegal financing of Russian separatist militias in the Ukraine.

So in a word, interesting.

To quote WEX itself: "Stay away from it, and never transfer your funds to such a sites."

Too interesting

Things got a little too interesting for WEX users a few months ago, as simultaneous factors raised immediate red flags for an exit scam. Withdrawals were suddenly disabled and certain coins started trading at enormous premiums. However, deposits kept working just fine.

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But even in the weeks after maintenance was supposed to be completed, users still kept reporting troubles. While there were a few ways to get funds out of the exchange, they were only available at sizable premiums. Then those, too, disappeared.

All those who lost funds to the bowels of WEX had few other options than to band together to keep an eye on the blockchain and to try to report on what seems to be an ongoing exit scam.

Then, a few days ago, WEX-watchers noticed a massive outflow of money from BTC-e/WEX-linked wallets to Binance. Approximately 93,000 Ether, worth about US$18.5 million, were moved. The funds started flowing in August, while the most recent transaction was on 22 October.

The timing, right after WEX stopped user withdrawals for indefinite "maintenance", is widely assumed to not be a coincidence. For unfortunate WEX users, it looked a lot like the exchange was about to sell their money and then disappear for good.

And so users petitioned Binance to freeze the transactions, which it did on 25 October. This is where the funds are now, frozen in limbo but not indefinitely. As a Binance spokesperson said, it could freeze funds for a short time but couldn't do so indefinitely unless law enforcement got involved. To that end, it encouraged affected users to get in touch with police.

Binance CEO Changpeng Zhao also announced the freezing on Twitter, with a certain degree of perplexity and irritation at being roped into cleaning up another exchange's mess.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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