On September 11, photographs of Star Xu, the founder and CEO of OK Group, the parent company of crypto exchange OKEx, being investigated by Shanghai police circulated around online cryptocurrency communities.
CNLedger, a trusted news source in the Chinese cryptocurrency community, reported that Xu was investigated by police officers in Shanghai after investors submitted complaints regarding a local cryptocurrency called WFEE. Investors claimed that Xu was a shareholder of WFEE and involved in the process of releasing the WFEE coin to the market.
“Sina News: Star Xu, founder of OKCoin/OKEX, is being investigated by Shanghai police. According to Lu Jun, officer at the local PD, Xu was suspected of fraud accused by investors. SH police has accepted the case. Preliminary investigation by Shanghai police shows that Xu’s company in Shanghai is not related to digital currency. The alleged fraud was not conducted in Shanghai but in Beijing, therefore documents will be handed to Beijing police,” CNLedger reported.
On September 13, OKEx, the world’s second largest cryptocurrency exchange behind Binance, publicly shared the official statement of OK Blockchain Capital, a strategic partner of OKEx and a subsidiary of OK Group, which directly addressed the alleged connection between Xu and WFEE.
The OK Blockchain Capital team stated that it invested in WFEE as an institutional investor when WFEE was a partner of WeShare WiFi, a global leading WiFi sharing company. Eventually, as WFEE grew, it acquired the investments of OKBC and other investment firms.
As such, OK Blockchain Capital stated that it has no authority over the operations of WFEE and that Xu has never been a shareholder of WFEE, refuting reports that Xu was allegedly involved in the token distribution of WFEE.
“The rumor that OK Group founder Star Xu being a shareholder of WFEE is fake. Mr. Xu has no equity relationship with WFEE and its company. We notice that the OKEx exchange has warned it users of the potential risk of WFEE last month and disclosed WFEE in their first OKEx Token Delisting / Hiding Guideline,” the OK Blockchain Capital team said.
If Xu had been involved as a shareholder at any point in the company’s history, the Chinese police could have detained Xu for participating in the illicit distribution of securities and for being involved in an initial coin offering (ICO), which is strictly prohibited in China, given that OKEx had listed WFEE in March.
However, given that Xu was not involved directly in the business of WFEE and a subsidiary of OK Group invested in WFEE as an institution, it is unlikely that Xu nor OKEx will face any consequence from the complaints filed by local investors.
As OK Blockchain Capital said, OKEx also delisted WFEE and warned users against the cryptocurrency on August 10.
“To maintain a healthy trading environment and pleasant trading experience on OKEx, our auditing team has carried out comprehensive monitoring on the market and projects,” the OKEx team said at the time, after delisting WFEE on its platform.
Still, it remains unclear whether the decision of the exchange to list WFEE in march could be an issue for the Chinese government, even though OKEx is based in Hong Kong, outside of the mainland.