The crypto industry was struck with another unexpected development last night that sent shockwaves throughout the market and caused Bitcoin’s price to reel lower.
Bitcoin’s sell-side pressure began growing earlier today after news broke of the OKEx not being able to process withdraws due to the founder being arrested by Chinese authorities.
He is the sole holder of the key required to process withdraw requests, which must be regularly inputted for withdraw requests to continue being processed on schedule.
His arrest has sparked questions as to why the exchange structured their multi-sig withdraw system in such a way that there is a single point of failure, and has venerated those who believe that decentralized exchanges are superior to centralized ones.
Interestingly, data from Glassnode also reveals that significant sums of BTC were moved off the platform in the 48 hours before withdraws were suspended.
OKEx Bitcoin and crypto withdraws suspended due to Chinese police investigation
For reasons still unknown, a Chinese police investigation targeted the popular cryptocurrency exchange serving individuals throughout Asia, with the founder getting caught in the crosshairs.
It remains unclear as to when the founder was arrested, but it does appear that there was a flurry of Bitcoin being moved out of the exchange in the 48 hours prior to the recent suspension.
“Prior to the suspension of cryptocurrency withdrawals from OKEx, we observed large BTC outflows from the exchange. According to our data, a total of 10,000 BTC (~$113 million) were withdrawn in two large batches in the past 48h.”
OKEx founder’s arrest highlights serious centralization flaw
Dovey Wan – a founding partner at Primitive Crypto – mused this recent imbroglio, noting that it strikes her as odd that a major crypto exchange holding billions worth of Bitcoin and other digital assets has such a single point of failure.
“Something is weird. If multi-sig, then how come the police hold majority of the signers under custody all at once? Usually signers spread out across different geo locations to avoid such case I suppose? Hard to imagine how such single point of failure occurs.”
It does seem as though there’s more to this story that has yet to be revealed, but in the meanwhile, over 200,000 Bitcoin – as well as tons of other digital assets – all remain in limbo.