Turkish Crypto Exchange Goes Offline, CEO Absent
The CEO of Turkish crypto exchange Thodex disappeared as users filed a complaint alleging that hundreds of millions of dollars were stolen.
Mehmet, 34, noticed the Turkish cryptocurrency exchange on Wednesday Thodex was no longer accessible; an error message was flashing on his screen. Panicked, he tried to access Thodex main site and found a disturbing a message: Thodex had suspended all transactions in order to evaluate an unspecified partnership offer. The process would take around four to five business days, he continued, adding that users would be regularly updated.
Before stopping trading, Thodex traded more than $ 585 million in cryptocurrencies on its exchange, according to The data by CoinMarketCap. A spokesperson for the data site told CoinDesk that the exchange stopped providing trading data around 5:00 p.m. UTC (1:00 p.m. ET) on April 20.
The exchange also had around 400,000 users, of which 390,000 were actively trading, according to the official Anadolu news agency.
While the Thodex website has announced that it will be back shortly, exchange officials are disabling their social media profiles and the platform’s customer support group is unreachable. The scholarship website mentionned “There is no need to worry” and that “the negative news on the Internet” is not true. Meanwhile, Thodex founder and CEO Faruk Fatih Özer shut down his Twitter account Wednesday.
Mehmet alerted police to the exchange’s sudden shutdown, telling CoinDesk that being shut out of the highly volatile crypto markets for five days could spell disaster for investors.
“Average people invest in crypto in Turkey because they would like to hedge their little funds against inflation here. So people will lose a lot of money including me, and I had to do something about it, ”Mehmet told CoinDesk.
At the same time, according to the state press service Anadolu Agency, a lawyer named Abdullah Usame Ceran filed a criminal complaint against Ozer for “aggravated fraud”.
Oğuz Evren Kılıç, chairman of the Ankara Bar Association’s Financial Markets Law Commission, told CoinDesk via a written statement that he learned from local police that Özer left the country on Tuesday evening. Özer too Did not respond Bloomberg’s attempts to contact him Wednesday morning. Istanbul’s Anatolian Attorney General’s Office has opened an investigation into Thodex for “fraud” and “creation of a criminal organization”, says CNN Turk.
A day later, the exchange denied the fraud accusations in an updated statement on its website. The same statement was shared on a new Twitter account assigned to Ozer.
People in Turkey are increasingly turning to crypto as a protect against inflation. Inflation in the country has increased this year, reaching as up to 16% in March thanks to soaring oil prices and recent volatility in the local lira, according to Bloomberg. Although the crypto space is unregulated in the country, at the beginning of the month, the central bank ad that the republic banned the use of cryptocurrencies for payments.
Crypto trading is unaffected by the new law, which is expected to come into effect at the end of the month. The sudden disappearance of Thodex therefore appears to be an isolated incident.
“There may be a scam here because there have been issues with this exchange for days,” Kılıç said.
The mystery of dogecoin
Mehmet initially thought something was wrong with Thodex when he saw some cryptocurrencies – including dogecoin, the cryptocurrency created as a joke in 2013 – was trading on the stock exchange at much lower prices than on other markets the night before the exchange closed.
In fact, on April 17, a Twitter user highlighted this dogecoin was selling on Thodex up to 30% below the market price. It was at a time when, a few days later, the price of dogecoin briefly replaced the XRP digital asset as the fourth largest coin by global market cap on Monday.
On April 19, the exchange announced that it was performing short-term maintenance on dogecoin transactions.
Just before the exchange went offline, dogecoin accounted for over 53% of Thodex’s $ 585 million trading volume, compared to a paltry $ 10 million in Bitcoin.
“This exchange has seen a lot of traffic on dogecoin for a few days. Tens of thousands of customers have flocked to this exchange’s website. In fact, even this price imbalance was suspect, ”Kılıç said.
Company reshuffle or exit scam?
According to the post on Thodex’s website, trading has been put on hold while the exchange considers a potential partnership with undisclosed parties.
“The world-renowned banks and fund companies, whose names we will announce at the end of the agreement process, have long wanted to invest in our company and have made a partnership proposal. In order to serve you better, it was decided to positively evaluate the partnership offer. For this process to be completed, transactions must be stopped and the transfer process must be completed, ”the statement read in Turkish.
Ismail Hakki Polat, blockchain speaker at the University of Kadir Has in Istanbul, said that based on the company’s statement, the only possible conclusion he could draw was that Thodex’s shareholding structure will be changed with the new investors.
“Before that, all opinions can be seen as speculative comments that will panic crypto investors and put the local ecosystem at risk,” Polat said.
Thodex claims to be the “first Turkish company authorized in the sector globally” with a license “received from the United States of America”, according to its statement.
The business refers to its registration as a Money Services Business (MSB) with the US Financial Crimes Enforcement Network or FinCEN. However, registering a business on the MSB Registrant Search web page is not a recommendation, certification of legitimacy, or endorsement of the business by any US government agency. It is not a license either.
Crypto exchanges can operate in the United States by obtaining money issuer licenses through government entities. A FinCEN registration does not, on its own, allow exchanges to begin trading operations.
Meanwhile, Kılıç, who has offered legal advice to those affected by Thodex’s sudden suspension of operations, says clients have been unable to reach exchange officials and no clients have been able to withdraw their money or crypto so far.
Mehmet hopes the stock market’s closure is temporary.
“Apparently the guys aren’t running away and it’s not a scam or anything. I think what they did was they damaged themselves and their clients, ”Mehmet said.
On Thursday, Thodex’s website updated the posted statement, saying the claims made against the exchange by users and the media were without merit. A new Twitter account, claiming to be Özer (who joined Twitter this month) also shared the statement.
It appears that Özer himself wrote the post, which goes on to say that during the partnership negotiations, an anomaly was found in the company’s accounts. Specifically, the message indicates that 30,000 user accounts (out of some 700,000) have been deemed suspicious and are in the process of being deleted.
“The Thodex platform has been temporarily closed to determine the reasons and sources. While our technical team at our company was carrying out this research, I personally went abroad on 19.04.2021 to do final meetings with foreign investors, ”the message read in Turkish.
Özer added that as a result of the “smear campaign” against him and his company, it became difficult to continue with his “commercial life”.
“In this way; I gently submit to the knowledge of the public that the smear campaign against myself and my company is not to be respected,” Özer said.
UPDATE (April 22, 2021, 2:17 PM UTC): The article has been updated to include a new statement issued by Thodex CEO Faruk Fatih Özer.