Hong Kong Crypto Exchange AAX Reopening Hinges on Capital Raise

The exchange shuttered activity Sunday at first blaming turbulent markets, but has denied having exposure to Sam Bankman-Fried's now-defunct FTX

AccessTimeIconNov 15, 2022 at 1:45 p.m. UTC
Updated Nov 15, 2022 at 6:49 p.m. UTC

Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.

Whether AAX will reopen at the end of this week depends on if the exchange raises more capital, and the firm may have to resort to legal action if that fails, the Hong Kong exchange said Tuesday.

The exchange temporarily shut down on Sunday, saying the failure of an unnamed "third-party partner" meant it had to manually verify customer balances before it could make any payouts.

That story has now changed, with a statement posted on the company website saying it was rushing to raise extra capital from its network and across the industry.

"If we are able to inject additional capital by the end of this week, AAX should be able to resume services as usual," the exchange said. "If AAX is unable to secure funding to enable us to restart operations, AAX is committed to initiate legal procedures to secure and ensure the distribution of assets."

No funds were compromised, and assets aren't under threat from hackers, the company said, although it admitted that it may have misrepresented its original reasons for closing.

"Our initial notification on the AAX app that linked the suspension to 'issues with a third party' would have been better expressed as us facing issues with malicious actors," the exchange said, noting that engineers had spotted abnormalities that suggested hackers were targeting AAX's sensitive data.

On Sunday, AAX cited turbulent markets as one reason for the disruption, but has denied having exposure to FTX, the crypto exchange that filed for bankruptcy in the wake of an implosion that started after CoinDesk first reported about troubles with the balance sheet of its sister company, Alameda Research.

In a statement earlier Tuesday, AAX said 2,000 users had requested withdrawals using a makeshift system introduced during the hiatus, adding that manual procedures meant returning deposits would take more time.

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Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.

CoinDesk - Unknown

Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.