Something Strange Is Going On at a Crypto Exchange Called WEX

Users of WEX, the cryptocurrency exchange built on the ashes of BTC-e, are reporting withdrawal problems, raising new questions about an already mysterious trading platform.

“‏Dear Wex, when withdraws will enable ??” asked Twitter user Alireza Moosavi on Friday, joining a crowd of Wex customers complaining they couldn’t withdraw funds for the second day in a row.

Ehsan Mahmoodi similarly inquired, “Hello, why withdrawal is disabled?”

A third user, Hasan Gusseynov, asked the exchange, in Russian, “When will everything be ok?”

The user complaints follow odd trading activity observed on the exchange. Earlier this week, CoinDesk reported that the price of bitcoin (against the U.S. dollar) shot up to nearly $9,000 on WEX, while it was still in the $6,000 range practically everywhere else.

Observers say the anomaly could have been due to a number of reasons, from recently-raised fiat withdrawal fees on the exchange to suspicions of insolvency. As of this writing, the USD price of bitcoin on WEX was $7,451, more than $1,200 higher than the price recorded on CoinDesk’s Bitcoin Price Index (BPI).

Stepping back, WEX was launched last year in an apparent effort to resurrect BTC-e, a long-running bitcoin exchange that was targeted and eventually shut down by U.S. and Greek law enforcement officials. A Russian national named Alexander Vinnik was arrested and charged with laundering billions of dollars on BTC-e, and U.S. regulators hit the exchange with a $110 million fine.

Although WEX claimed to be unrelated to BTC-e, its website design and trading pairs were very similar and it was pitched as a service for former BTC-e customers.

Questions aside, posts on social media as well as WEX’s chatbox indicate that the withdrawal problems remain ongoing as of press time, though a note on the exchange’s official Twitter account claimed that user funds are secure.

The developments also follow a string of reports from Russian media outlets detailing the murky background of the exchange, as well as a reported legal effort filed by one of BTC-e’s former users.

Unanswered questions

In a July 12 post on Facebook, Dmitry Vassiliev – who, according to Singapore records obtained by Russian news agency RBK, is listed as the owner of WEX’s operator, World Exchange Services – attributed the price disparities to the actions of Dmitry Sutormin, who he described as a former WEX manager.

Vassiliev explained that Sutormin, a vice president of the Russian Association for Cryptocurrencies and Blockchain and a venture investor in Russia, had been selling a high number of “WEX codes,” which could be redeemed on the exchange for cryptocurrency.

Sutormin “carried out the purchase and sale of WEX codes in any volumes,” Vassiliev explained, “which means that there are a lot of codes on the market … now all those who bought those codes want to buy bitcoin, exchange rate goes up, as very few wish to sell.”

However, talking to CoinDesk via Facebook Messenger, Vassiliev said he’s not sure what Sutormin’s role is now, because, as he admitted, at some point he lost control over the exchange. He would not go into additional specifics.

And when reached via Telegram, Sutormin said that he has no connection with WEX and has never worked there.

“I bought and sold my own codes, I was, in fact, the exchange’s client,” he explained. When asked why he would sell his codes, he said he was “affected by the hype around cryptocurrencies,” adding that it’s a popular business in Moscow.

RBK recently dove into the topic during a long piece on WEX. RBK reporter Andrew Zakharov attempted to conduct such a deal, pretending that he wanted to buy a large amount of bitcoins through a meeting in Moscow and contacting Sutormin who, in turn, connected him to other people for the transfer of money.

Meanwhile, earlier this week, the Russian cryptocurrency website CoinRadio detailed a lawsuit filed by a former BTC-e customer named Pimporn Carty. The website also published a copy of the claims made against WEX.

Carty reportedly sued WEX over funds previously held on BTC-e prior to its collapse, arguing that once she was able to regain access, some of the funds went missing, including more than 11,000 litecoins. While a hearing on the issue was reportedly scheduled for July 12, and referenced in Vassiliev’s Facebook post, it’s unclear whether the meeting took place or, if so, what the outcome was.

Who’s in charge?

Indeed, statements from Vassiliev suggest that it’s not entirely clear who is in charge of WEX at the moment.

RBK also reported that Vassiliev was planning to sell the exchange to Dmitry Khavchenko, a former volunteer fighter in the war in Ukraine and a participant of the militia forces in Crimea that supported the Russian annexation in 2014.

Khavchenko, in turn, told RBK that he was going to move WEX’s office to Crimea and register the managing company in the war-torn region of Ukraine known as Donbass.

According to RBK’s sources, Khavchenko and other people engaged in the conflict in Ukraine are already involved in the exchange’s management, including people connected to Konstantine Malofeev, who has been cited in the press as one of the shadow sponsors of East Ukrainian militants.

WEX denied that the exchange is going to be sold on Twitter, and the exchange did not respond to questions regarding who is in charge or why, exactly, its prices shot up earlier this week.

Image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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