Star Xu, the founder of OKEx and OKCoin cryptocurrency exchanges, both of which are based in China, was held for questioning by Shanghai authorities on Monday night. Xu was probed about an alleged cryptocurrency fraud, according to local website Sina.
Xu was brought in on the heels of complaints by investors in WFEE, a cryptocurrency project that the OKEx chief is involved in, blaming Xu for a fraudulent scheme. Xu is reportedly a shareholder of the company that issued the native tokens that were sold through the website.
Several complaints surrounding the venture reportedly made their way to the Shanghai police department, most of which described a cryptocurrency with the makings of a fraudulent scheme. Xu went through a round of questioning surrounding the complaints and was expected to be released within 24 hours if authorities couldn’t find concrete evidence to open an inquiry.
The development seems to have exacerbated the persistent unrest in the cryptocurrency market, as evidenced by the current condition of most coin prices. Even so, if Xu is involved in some illicit practice, all of his businesses are similarly at serious risk of being targeted for investigation.
In China, the main reason for the ban on all cryptocurrencies activities was a result of the observation by authorities of fraudulent activities that had harmed Chinese investors.
In mid-May 2018, the local court convicted four suspects of coordinating a financial pyramid scheme involving cryptocurrencies from which the criminals absconded with approximately $2 billion.
In fact, there are several cases like this that have unfolded around the world. In Brazil, for example, courts are still investigating one of the most recent financial pyramid cases which disguised itself as a bitcoin miner, victimizing thousands of investors last year.
Meanwhile, even cryptocurrency mining activity is being banned in some regions. Recent development in China’s Xinjiang Uyghur Autonomous Region, where miners’ activities were shuttered.
Chinese authorities are also seeking to block the access of 124 foreign crypto exchanges that are being accessed in the country, following its strongly restrictive policy on the industry.
Even so, Chinese cryptocurrency investors have proven resilient, and many have shifted their activities across the border using Virtual Private Networks (VPNs) to negotiate online crypto transactions.