Exchange News – Binance, Bitzlato, Luno, OKX, Zipmex and More

In a surprise turn of events this week, Coinbase revealed on Wednesday that it had received legal threats from the US Securities and Exchange Commission (SEC).

Chief legal officer Paul Grewal discussed the pretext, basis, and implication of the ‘Wells Notice' sent from the market regulator. Grewal expressed the exchange's disappointment in the SEC's actions of targeting its staking service Coinbase Earn and other offerings, including Coinbase Prime. The exchange said it is prepared to challenge the watchdog on the contentious legality of its assets and services. Here is a roundup of other headlines around crypto exchanges in context March 20 – March 24:

Binance restores services after a brief outage due to a matching engine bug

Binance earlier today paused deposits, withdrawals, and spot trading after encountering a bug on a trailing stop order. The incident, which CEO Changpeng Zhao described as unlucky, came a week after the crypto exchange said it was disabling sterling payments. The glitch prompted temporary system maintenance, stirring a bit of concern among users before it was addressed.

In one of several updates, CZ said that decision was standard operating procedure. Binance’s technical team worked through the fault and confirmed it had completed the temporary system maintenance. Services, including deposits, internal transfers, P2P trades, and redemptions, have since been restored. Trailing stop orders are, however, temporarily suspended until further notice. Concurrently, all existing trailing orders expired automatically.

Zipmex's $100 million buyout hits a snag after buyer misses a scheduled payment

The future of Thailand-based exchange Zipmex, which was due to receive a $1.25 million payment as part of a package from a rescue investor, may yet be in the balance.  In December, the troubled exchange agreed to a memorandum of understanding entailing a $100 million buyout deal with its buyer V Ventures. The agreement is now in jeopardy due to the latest happening, according to a Friday report from Bloomberg. A hypothetical outcome of the investors failing to go through with the fourth monthly tranche payment – the deadline elapsed on Thursday – will put the exchange in an even more difficult position as it desperately needs working capital.

A letter cited by the news outlet noted that failed payment could compel the exchange to liquidate its technology unit, Zipmex Technology and suspend the division’s payroll. The tranche payments have been directly funding the exchange’s operations due to its related cash flow issues. Zipmex has salary obligations for employees in Thailand and its overseas Australia, Singapore, and Indonesia branches. The exchange had not received any communication from the investor, a Thoresen Thai Agencies subsidiary, despite its attempts to reach the venture capital fund.

Zipmex’s financial troubles spring from unpaid loans to firms impacted heavily by the collapse of Terra in May. Reports detail a $48 million exposure the Thai exchange had to Babel Finance and $5 million exposure to bankrupt lending firm Celsius. Citing volatile market conditions that aggravated its exposure, the exchange halted withdrawals on its platform last July. Recovery plans based on an agreement with a then-potential investor emerged in August as the exchange arranged a meeting with the domestic regulator. The discussion progressed to an advanced stage by November, with the exchange confirmed to be working on the sale of a majority stake to V Ventures. The exchange has since resolved to engage its advisers on the next steps.

Bitzlato users can withdraw up to 50% of assets they held on the platform

Crypto exchange Bitzlato, whose operations were halted by enforcement action on account of allegations of money laundering for criminal enterprises, announced on Monday partial withdrawals. In a Mar 20 communication, the exchange said users could access up to 50% of the balances they held on the platform. All withdrawals were made available in BTC as the Bitzlato converted the alts it had once it was hit by legal action, with the minimum withdrawal set at 0.001 BTC and the commission at 0.0003 BTC.

The majority of users have, however, elected to wait until P2P trading opens on the platform, set for April 2023, according to a roadmap toward resuming services it received. A spokesperson clarified that though users will regain access to all previously available functions, it wouldn’t necessarily imply a 100% recovery of all assets. The spokesperson added that though Bitzlato has yet to resolve the matter concerning customer funds, it intends to reimburse users by reclaiming the confiscated funds through Europol or utilizing its resources once the firm accumulates sufficient funds to cover the losses.

OKX to close shop in Canada amidst a shifting regulatory landscape

Cryptocurrency exchange OKX notified its Canadian clients earlier this week via email that it would halt its services and prohibit the opening of new accounts in the country today due to newly adopted regulations. The exchange advised the local users to liquidate any open options, margins, perpetual, and futures positions by June 22 and withdraw all fiat or tokens by that date as well. Crypto exchanges in Canada have incurred huge fines due to failure to meet registration requirements in the country.

The Canadian Securities Administrators (CSA) recently directed that crypto exchanges yet to be approved to operate in Canada must sign legally binding “undertakings” to bolster investor protection.   These undertakings would, among many other things, ban the buying and depositing of stablecoins (with the exception of USDC) without the prior written consent of the CSA.

OKCoin suspended MiamiCoin and NYCCoin trading, citing low liquidity conditions

Last week, OKX-affiliate crypto exchange OKCoin suspended the trading, buying, and selling of citycoins MiamiCoin, and NYCCoin, citing dire liquidity conditions. In a blog post sent earlier this month, the crypto exchange said that the reduced liquidity makes the citycoins susceptible to price manipulation and fraud by malicious actors. OKCoin said it would reinstate trading of the citycoins once the liquidity situation is much more stable, and it has addressed the existing risks to keep all customers safe.

The San Francisco-headquartered exchange encouraged users of the platform to withdraw their citycoins and trade them on ALEX decentralized exchange in the meantime. Its approach is a prudent and preventative measure since the risk of attacks has not yet materialized. In justification, OKCoin said the decision is in the best interest of user funds and the platform's integrity. While OKCoin survived the impact of Silvergate and Silicon Valley Bank, it was caught in the takeover of Signature Bank by the New York Department of Financial Services. Signature’s woes meant OKCoin could not process incoming wires, ACH, and credit card transactions; hence the exchange decided to halt all US dollar deposits via these methods. In extension, over-the-counter services were also paused, though this did not affect both crypto and USD withdrawals.

WazirX received 431 Law Enforcement Agency requests in the last six months.

India’s largest crypto exchange by trading volume, WazirX, on Tuesday published its 4th transparency report, which revealed that it received 431 requests – 385 from Law Enforcement agencies within India and the rest from agencies outside the country for the six months between October 2022 and March 2023. The requests affected transaction volume of up to $390 million. These inquiries primarily pertained to matters regarding account blocking, suspected criminal activity, investigations, and information regarding whether specific individuals transacted in crypto via WazirX.

The crypto exchange also blacklisted more than 2,431 accounts in this period, using a combination of its in-house monitoring mechanisms and directives issued by various law enforcement agencies (LEAs). Notably, WazirX leverages third-party forensics platforms such as TRM Labs and Chainalysis to reinforce its compliance and monitoring systems against suspicious activity. WazirX said it was prompt in furnishing all requested details, brandishing a compliance rate of 100%. The Mumbai-based exchange collaborated with several foreign law enforcement agencies, including the Toronto Police Department, Police Department Dortmund, and the New York County District Attorney's Office.

Locally, WazirX has teamed up with law enforcement agencies such as the National Investigation Agency and Enforcement Directorate for effective regulation. WazirX assured it continues to abide by its obligation to notify law enforcement agencies, including the Financial Intelligence Unit of India, of potentially illicit transactions, particularly those in which user trading volumes did not correspond with their individual income, financial status, or income tax returns. The exchange flagged several transactions as high-risk based on alerts received from third-party forensic tools and users who failed to provide requested information or clarification regarding the source of funds or income proof.

Bitget invested $30M to take the controlling stake in crypto wallet BitKeep

In other news, crypto trading platform Bitget disclosed on Wednesday a controlling shareholder stake in Web3 DeFi wallet BitKeep. The crypto derivatives exchange injected a $30 million investment in the multi-chain wallet at a $300 million valuation, which is to result in a merger of BitKeep Wallet and Bitget's business domain.  The press statement added that the arrangement would also empower Bitget to expand its business services to include native storage and asset management services. Further, Bitget aims to optimize the stability and security of its trading operations by using the BitKeep wallet on its exchange platform to manage digital assets across different blockchain networks.

The exchange will benefit from a new clientele once it integrates the 8 million-strong user base of BitKeep. This will build towards Bitget’s desire to grow beyond derivatives services to become a holistic platform for centralized finance (CeFi) and decentralized finance (DeFi). The partnership will, on the other hand, provide the decentralized digital assets wallet access to Bitget’s established tech expertise and security capabilities in the exchange business.

BitKeep Chief Operating Officer Moka Han said the partnership presents endless possibilities in expanding user access to comprehensive digital asset management services and the growth of its enterprise. Bitget managing director Gracy Chen clarified that the controlling stake Bitget has gained is way beyond 51%, though she refused to quote any numbers. Further, Chen compared the deal that BitKeep struck to Binance's acquisition of Trust Wallet in 2018 but also made it clear that Bitget supports collaborative efforts; hence, it intends to refrain from challenging Binance for its spot at the top. Notably, under the new agreement, the anonymous chief executive officer of BitKeep, Kevin Como, will vacate his position, and the current chief product officer Karry Cheung, will assume the CEO role.

DCG-owned crypto exchange Luno revamps top leadership, eyes a public listing

Elsewhere, a Wednesday release by Digital Currency Group-owned crypto exchange Luno Rejiggers revealed the company had revamped its top leadership structure in anticipation of a possible future public listing.  Luno co-founder Marcus Swanepoel stepped down from his position as CEO and transitioned into executive chairman. The retail-focused exchange promoted chief operating officer James Lanigan, who joined Luno in 2018 and previously served as chief marketing officer, to take over the mantle.

Swanepoel, whose tenure as a co-founder and CEO of Luno lasted over a decade, expressed optimism in the forthcoming phase of Luno. The former bank said he believes the next stage will improve the accessibility of crypto to the masses. In addition, he noted that the potential for crypto is at an unprecedented high. He also praised CEO James Lanigan as an experienced practitioner and exceptional director with a proven record of achievements in managing a genuinely worldwide financial technology enterprise.

More than just leadership changes

Following the leadership changes, Luno intends to secure funding from non-DCG investors to facilitate its global expansion, boost its market presence and ready itself for an upcoming listing. The company revealed that it has enlisted investment bank Canaccord Genuity Group to aid in procuring fresh capital from external investors, marking Luno's inaugural effort to invite external investors onto the table since DCG's acquisition of the company slightly over two and a half years ago.

DCG, the parent company of Luno, is currently dealing with the repercussions of the prolonged aftermath of the significant decline in token prices last year. Additionally, the collapse of FTX further exacerbated the situation, with its failure in November causing a chain reaction of bankruptcies throughout the industry. Swanepoel’s decision to resign from his position as CEO marked the culmination of a series of unfavorable events that have plagued Luno. Due to market instability, the firm let go of 35% of its employees in January. Furthermore, a month earlier, Luno experienced another setback when co-founder and chief technology officer Timothy Stranex departed from the company.