Crypto exchange AAX’s freeze on withdrawals sparks desperate search for funds

Cryptocurrency investors in AAX are searching for senior executives of the exchange after its decision last month to halt withdrawals triggered a backlash among users.

The Hong Kong-headquartered crypto exchange, which once boasted 2mn users, announced with great fanfare in 2019 that it was the first digital asset exchange to use the London Stock Exchange’s trading technology.

But AAX, which stands for Atom Asset Exchange, halted customer withdrawals on November 13 for what it called temporary “scheduled maintenance” to “address serious vulnerabilities”. Employees at the exchange alleged the outage was caused by liquidity problems.

The search, conducted by thousands of users through multiple Telegram messaging groups, underscores the increasing desperation of investors in the unregulated industry. According to AAX users, the exchange has since failed to process customer withdrawals, and staff told the Financial Times they had been disconnected from the company’s email systems.

The Hong Kong Monetary Authority, the city’s financial regulator, said the exchange did not fall under its purview, while the Securities and Futures Commission said it did not comment on individual cases. AAX is not one of the SFC’s few licensed virtual asset trading platforms.

Hong Kong is a crypto hub, housing offices of several groups, including Sam Bankman-Fried’s FTX exchange and his crypto trading company Alameda. Just before FTX’s collapse, Hong Kong had signalled plans to legalise retail trading of crypto assets.

AAX vice-president Ben Caselin said on Twitter he resigned on November 28, citing a loss of trust in management. Caselin, one of the AAX executives users are searching for to recover their funds, told the FT he was unable to help.

He characterised his previous role as a “spokesperson” who was uninvolved in the company’s financials. Caselin added he “felt very unsafe” in Hong Kong but declined to confirm his location.

After withdrawals were paused, AAX users set up Telegram groups to exchange information and posted leaked pictures of senior executives’ personal identity documents to try and establish their whereabouts.

“I started to notice there was something suspicious behind all this, so I did my own investigation,” said Mike Ong, a Singaporean financial executive who is part of the groups. “In that period when they said they were doing maintenance, a lot of core management started to delete their online presence.”

In November, AAX users visited the Hong Kong offices only to find them deserted. Ong visited the exchange’s Singapore co-working space but there were no employees working. The Telegram groups now have thousands of members, including former staff members who still have money on the exchange.

Some employees were subsequently told by management that several large cryptocurrency holders pulled their funds from the exchange in the wake of the FTX crisis. Their access to the company’s email and Slack channels have since been disconnected.

AAX did not respond to a request for comment.

Users are specifically attempting to contact Victor Su, one of the exchange’s main investors considered a senior executive, who was previously based in Hong Kong.

Su refused to reveal his location to the FT and threatened legal action over “unrealistic reports” that had been published against him.

“I have not, and I will not [abscond], I believe that the law will give the best answer,” Su wrote in a text message on Wednesday. “I am also an investor, and I have lost a lot in it.” He did not elaborate further.

“We will continue to pressure the senior executives through our [Telegram] groups,” said one organiser of the user investigation. The groups have also been attempting to report concerns to police in Singapore, Taiwan and Hong Kong, but Caselin said such efforts were futile.

“Some people have asked me why I am not filing for a report with the Hong Kong police,” he wrote on Twitter. “First off, AAX is a Seychelles-based exchange despite AAX’s roots in Hong Kong, so it’s useless.”