Two Chinese Exchanges Help Themselves to User Funds

August 23, 2017

Huobi and OKCoin have been investing client’s funds in high risk options for their own gain.

It has come to light that two of China’s largest Bitcoin exchanges, Huobi and OKCoin, have been using idle client funds to make investments in “wealth management products“ which are often high-yielding and risky.

Collectively over one billion yuan ($150 million) of client funds was used without permission,, state newswire Xinhua reported.

The central bank weighs in

Xinhua’s damning report on OKCoin and Huobi came about because the People’s Bank of China had been investigating and clamping down on Bitcoin trading in recent months.

Fearing capital flight and money laundering, the central bank has waded into the quagmire of  unregulated exchanges operating in China. Earlier in the year it issued warnings about Huobi and OKCoin, expounding on the risks surrounding them.

This report led to the exchanges stopping their zero-fee trading and margin trading, in order to conform to the requirements of the central bank.

The exchanges also famously stopped withdrawal services for quite awhile, only reactivating them about two months ago.

Murky details

There were no details in the report about the financial products Huobi and OKCoin invested in using those client funds and Huobi declined to comment. A representative for OKCoin didn’t respond to a request for comment either.

The common practice among US and European exchanges is that the finds that are accumulated by the exchanges are simply held, rather than used. Anything other than that means that the exchange is essentially operating a fractional reserve.

You may be interested

Blockchain Unlocks Consulting Model for Experts of All Kinds, Worldwide
Blockchain
29 views
Blockchain
29 views

Blockchain Unlocks Consulting Model for Experts of All Kinds, Worldwide

btcethereumadmin - November 23, 2017

Consultants are vital to many businesses, and Blockchain can connect clients to untapped experts worldwide. Quality consultants are key to…

Keiser Envisions $100,000 Bitcoin High
Bitcoin
32 views
Bitcoin
32 views

Keiser Envisions $100,000 Bitcoin High

btcethereumadmin - November 23, 2017

Max Keiser is hopeful that Bitcoin could rise to $100,000 in the future, asserting its dominance as the father of…

Price Analysis, November 22: Bitcoin, Ethereum, Bitcoin Cash, Ripple, Litecoin
Altcoin
40 views
Altcoin
40 views

Price Analysis, November 22: Bitcoin, Ethereum, Bitcoin Cash, Ripple, Litecoin

btcethereumadmin - November 23, 2017

Here’s a trading review on top cryptocurrencies. The views and opinions expressed here are solely those of authors/contributors and do…

Leave a Comment

Your email address will not be published.