BitForex in Crisis: $57M Outflow, Website Down, and Allegations of Wash Trading

Hong Kong-based cryptocurrency exchange BitForex is in crisis mode after its website went offline on February 23 following the reported withdrawal of $57 million from its hot wallets.

Wash Trading Scandal and Website Shutdown

Decentralized finance (DeFi) detective ZachXBT brought the incident to light on Twitter, raising concerns about the exchange’s operations. BitForex has yet to issue an official statement, leaving users seeking answers on Telegram.

CEO Departure and Suspicious Trading Patterns

One month before the incident, BitForex CEO Jason Luo announced his departure, expressing confidence in the new leadership team’s ability to guide the exchange towards “greater horizons.” However, the sudden withdrawal of funds and subsequent website shutdown have intensified doubts surrounding BitForex’s operations.

A report by digital assets data provider Kaiko on February 9 alleged that BitForex had the highest number of pairs with outsized volumes relative to their depth, raising suspicions of potential wash trading, a manipulative practice to create artificial trading volume.

Kaiko’s Analysis

Kaiko’s analysis employed a volume/depth ratio and tick-level trades to identify potential wash trading patterns. Notably, BitForex’s reported volumes did not align with trends seen on other exchanges, and irregular volume patterns were observed for Polkadot (DOT) and LTC markets.

Credibility Crisis

The analysis also revealed high spreads on the exchange, indicating thinly traded and illiquid markets. Despite claiming significant volumes, BitForex’s spreads were considerably higher than those observed on more liquid pairs on top exchanges.

Community Awaits Official Statements

The crypto community awaits official statements from BitForex executives regarding the $57 million outflow and the offline website. The allegations of wash trading and suspicious volume patterns add to the exchange’s credibility concerns.

Global Cryptocurrency Market Update

At the time of writing, the global cryptocurrency market continues to grow, with the total market capitalization standing at $1.94 trillion. Bitcoin’s (BTC) market cap has reached $1.05 trillion, as it currently trades at $51,100.