Crypto exchange accused of pumping and dumping


Crypto exchange BitMax has been accused of enabling and promoting pump and dump schemes, which resulted in several promising projects crashing.

Han Yoon, the CEO of Lunar Digital Assets, claims that several projects that were launched on BitMax were ruined by aggressive “market makers” on BitMax.

Big promises and no deliveries

Believed by many to be the future of blockchain projects, initial exchange offerings (IEOs) have been slowly taking over the crypto space.

Following the successful debut of Binance’s IEO platform, Binance Launchpad, the eyes of the crypto community were trained on BitMax, an exchange founded by Wall Street veterans, as a potential contender to become the go-to IEO platform.

After it launched in 2018, BitMax was seen as one of the most promising exchanges on the market, a view which Yoon himself once shared.

“I had high hopes for BitMax — I thought that maybe they could soon be a real contender to Binance… I couldn’t be more wrong,” he wrote in a recent blog post.

Problems at the company supposedly began after it hired a new head of business development, Shane Molidor, formerly a top exec at digital asset management firm FBG Capital.

Yoon claimed that experienced investors advised everyone to steer clear of FBG, and said the company’s decision to hire Molidor was not well received.

“A long time friend and avid ICO investor in 2017 and 2018 told me ‘I wouldn’t touch an FBG project with a ten-foot pole,'” Yoon recounted.

One of Yoon’s clients, DeepCloud AI, was reportedly told by Molidor during negotiations that BitMax had “the best market makers in the world,” which was very quickly revealed to be false.

Aggressive market makers bring multiple crypto projects down

According to Yoon, BitMax’s market maker was used to artificially pump the price of DeepCloud AI’s DEEP token instead of just providing liquidity.

“BitMax’s ‘market makers’ managed to burn through $1.275mil in liquidity funds in a matter of weeks,” Yoon said, explaining that extremely aggressive buying led to a complete loss of liquidity on the buy-side.

“With no buy support, naturally the token’s value plummets violently,” he added.

A colleague of Molidor’s reportedly told Yoon that this was nothing new and that he has been known to brag about his pump and dump tactics that date back to his days at FBG.

Yoon examined four other IEOs that have launched on BitMax, only to find that the same thing that has happened to almost every single one.

Apart from DeepCloud AI, DOS Network, DUO Network, and Ferrum Network all saw the prices of their coins crash as a result of aggressive market making.

None of the coins saw a return on investment higher than 0.33x, with the DeepCloud AI seeing its ROI dip all the way to 0.03x.

DeepCloud AI (Source: Lunar Digital Assets)

Just a single project managed to get off the ground and not get shut down by BitMax’s market makers – UltrAlpha.

The professional digital asset management service platform is the personal project of George Cao, the founder and CEO of BitMax.

UltraAlpha (Source: Lunar Digital Assets)

It is still unclear whether this is a result of incompetence or an intentional scheme designed to kill crypto projects.

Regardless, Yoon said that several projects are looking to join forces to consider legal options against the exchange.

In September, a CryptoCompare report found that BitMax constituted roughly half of all USDT trading volume across all exchanges.

A trans-fee mining exchange, BitMax has been accused of enabling wash trading and received the lowest rating based on its security.

BitMax CEO replies

Shortly after Yoon published his blog post, BitMax announced that it was delisting DeepCloud AI’s DEEP token:

According to the announcement, the exchange cited “Discrepancy of token unlocking / vesting schedule vs the schedule published in the project’s whitepaper or the schedule communicated to” and “Lack of proper disclosure on increases to token circulating supply to and the project’s community” as the reasons for the delisting.

In an AMA hosted in the BitMax Telegram Official English channel earlier today, BitMax’s CEO noted that the delisting of DEEP marked the first time the platform had ever delisted a token and that it was a “tough decision” to make.

“This is the first time we [delisted] a project and actually this is the project we spent the most money and efforts [on]. Tbh I have been upset for a while. But we know this is the right decision to make,” he said.

Cao further shared that BitMax was not aware of the private allocation of additional “strategic” investors which led to the increase in the circulating supply of DEEP.

After confronting DEEP’s team about the additional supply, BitMax immediately initiated a $300,000 buy-back of the tokens.

Many participants in the AMA called for BitMax and DeepCloud AI to provide clarity to the situation by agreeing to release additional data as well as transcripts of past conversations.

Presently, no such agreement has been reached, though DeepCloud AI CEO Max Rye was on hand to announce that they, too, would be hosting an AMA in the near future.

Priyeshu Garg

Priyeshu Garg is seasoned blockchain journalist and software engineer. He loves to skate, swim and contribute to open source.

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Priyeshu Garg

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