OX token plummets amid OX FUN extortion and insolvency of former 3AC founders rumors

OX.FUN, a crypto derivatives exchange linked to the bankrupt Three Arrows Capital co-founders Su Zhu and Kyle Davies, is under fire following allegations of financial misconduct.

The controversy erupted after the platform allegedly withheld $1 million from a user, JefeDAO, sparking concerns over its financial stability and operational transparency.

This drama has negatively impacted the exchange’s native OX token, down more than 35% in the last 24 hours to $0.00875 as of press time, according to CryptoSlate’s data.

Extortion allegations

On Feb. 24, OX.FUN accused JefeDAO of engaging in illegal market manipulation, which is contrary to the platform’s terms of service.

According to the exchange, JefeDAO deposited $1 million USDC on Feb. 14 and initiated aggressive trades within minutes. The user allegedly placed large limit orders at lower-than-market prices, forcing the value of JAILSTOOL tokens down before closing short positions at a significant profit.

OX.FUN said it responded to this action by freezing the user’s funds, citing a violation of its terms of service. The platform claimed that JefeDAO had pressured the exchange to release the funds through social media. The exchange also stated that the trader rejected a proposed settlement.

However, JefeDAO has pushed back against these claims, accusing the exchange of extortion.

He revealed that the platform proposed releasing the frozen funds in exchange for five months of free promotion. Screenshots circulating online suggest the platform planned to return the money in $200,000 monthly increments, provided JefeDAO endorsed the exchange publicly.

These allegations have drawn sharp criticism from the crypto community, with many viewing OX. FUN was unethical.

Industry figures have also questioned why traders would use a platform associated with Su Zhu, given his controversial past in the crypto space.

Ox.Fun’s financial health

As the dispute unfolds, doubts about OX.FUN’s financial health has intensified on social media.

Conor Grogan, a director at Coinbase, revealed that on-chain data suggests the exchange holds less than $1.7 million in non-OX assets. If a pending $1 million USDC withdrawal request is processed, its USDC reserves could drop to just $1,000.

Grogan’s analysis also indicated that OX. FUN’s Ethereum Gnosis safes are nearly depleted, with the remaining assets primarily consisting of obscure tokens such as FWOG and SLERF.

He noted that the exchange has been withdrawing liquidity from liquidity pools, selling SOL to acquire USDC, and purchasing OX tokens.

Meanwhile, Grogan noted:

“There is a chance that they have untagged wallets I’m unaware of/not able to track.”

Further speculation about OX. FUN’s financial health emerged after reports of significant withdrawal outflows.

A viral message from a former employee purportedly suggested that only $180,000 remained available for withdrawals. The message also hinted at internal struggles to distribute the last funds.

Despite these reports, OX.FUN has denied the insolvency rumors, asserting that withdrawals are processing as usual. However, its statement did not address allegations related to layoffs or the remaining liquidity levels.

The post OX token plummets amid OX FUN extortion and insolvency of former 3AC founders rumors appeared first on CryptoSlate.

This article was originally published on Bitcoin Magazine.