What has been a fairly bad few weeks for cryptocurrency exchanges, just got a little worse? A Vancouver-based crypto trading platform, Einstein Exchange, has been closed by Candian authorities; while still owing $16 million in outstanding obligations.
What Happened to Einstein?
On Monday, the British Columbia Securities Commission (BCSC), provided a statement noting the “action to protect customers” of the Einstein exchange.
The regulatory agency sought a Supreme Court order on November 1, designating an interim receiver to seize the exchange. The accounting firm, Grant Thornton Ltd – the same firm in charge of the Quadriga exchange proceedings – was subsequently appointed. Shortly after being greenlit by the Supreme Court, the firm stormed and secured the Einstein offices, officially shutting the exchange down.
As per its application for the court order, the BCSC highlighted several complaints from customers unable to access their assets. On October 31, Einstien told the commission that it would be forced to close within 2 months citing profit shortfalls. The commission was originally alerted to the Einstien exchange back in May to possible money laundering through the exchange. While these concerns weren’t hugely elaborated upon, the BCSC alluded to Einstein using their customer assets “improperly”.
According to the commission investigator, Sammy Wu, Einstien owes its customers $12.4 million (CAD $16.3 million)— with cryptocurrencies amounting to $8.3million (CAD $11 million)
A Bad Few Weeks for Cryptocurrency Exchanges
It’s not been a good time to be a crypto exchange of late. Last week, crypto derivatives platform, BitMEX found itself embroiled in controversy as thousands of user emails leaked into the open. A community uproar followed with many citing extreme negligence. According to multiple reports, the exchange simply forgot to use blind copy (bcc) in a newsletter to subscribed users, exposing a myriad of user info.
Things didn’t get any better for the embattled exchange as their Twitter was supposedly compromised. Shortly after the initial debacle, BitMEX’s official Twitter account shared a few ominous messages to its followers.
Unfortunately, this wasn’t the only rotten news to hit crypto exchanges. On November 3, the Nasdaq-powered cryptocurrency platform, DX.Exchange closed its doors. According to an official blog post, the exchange had become unsustainable, forcing the firm to either form a merger or sell:
The costs of providing the required level of security, support and technology is not economically feasible on our own.
Following the announcement, trading was halted and all deposits were suspended. In order for a merger or sale to commence all client funds need to be returned.
The blogpost detailed the withdrawal process, requiring each customer to send a laundry list of ID checks to an exchange support email, providing a deadline of November 15.
The exchange is in danger of permanent closure unless it salvages a merger or an outright sale.