Blockchain Global Limited, the operator of the ACX exchange, is accused of diverting customer funds to raise a loan to support another arm of its business.
The matter was brought before the Supreme Court of Victoria by the exchange’s liquidators on the grounds of financial discrepancies. Jin Chen, former Chief Technology Officer of the company, admitted under examination to moving funds on the instruction of the firm’s co-founder, Allan Guo.
“Allan instructed me to send 100 bitcoin to an employee at the time of Blockchain Global Limited, and I understand it was for a collateral purpose,” said Chen. “There’s no way of identifying that this bitcoin was owned by Customer A and this bitcoin is owned by Customer B.”
Blockchain Global ran into financial difficulties that forced it to shut down its operations, leaving hundreds of account holders with losses in the region of A$50 million. Court-appointed liquidators Andrew Yeo and Innis Cull of Pitcher Partners have been unearthing the facts leading to the firm’s collapse in 2021, and in the process, even more sinister matters have been discovered.
The liquidators revealed that Blockchain Global’s ACX exchange severely breached the money reporting rules for stockbrokers and other trading firms after it mingled clients’ and other funds into one pooled fund. The other funds merged include profits from the firm’s trading account and proceeds from a loan using the client’s monies.
The hearing has been scheduled to continue on Thursday, and if found guilty, the principal members of the company could face a lengthy term in prison and the payment of hefty fines.
Liquidation processes hit some stumbling blocks
The digital asset industry is going through the throes of several liquidations of top firms at the moment. Three Arrows Capital (3AC) and Celsius have been in bankruptcy court since August, and the twists and turns of the case have left creditors scratching their heads.
The court-appointed liquidators of 3AC have applied to the courts for leave to use alternative means to serve subpoenas on Su Zhu and Kyle Davies, founders of the embattled firm. The application asked the court for permission for the founders to use social media accounts to serve the subpoenas on the duo.
Since the proceeding, Zhu and Davies have maintained radio silence, with their identities remaining unknown.
“The founders’ refusal to offer forthright cooperation has hindered our ability to perform our duties,” said Russel Crumpler, a court-appointed liquidator.
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