It turned out that in addition to the arrest of Mingxu Xi (Star Xi), two heads of the exchange, possessing secret keys that allow access to information about the user's wallet, were also detained. However, they were released on bail after handing over the keys to Hong Kong police.
Let's clarify that ordinary users working with OKEx have nothing to fear - their funds were not confiscated, but simply blocked. For an indefinite period, however. However, those individuals and companies who have done business with mainland China are less fortunate.
It was the possible trade in China that became the reason for the arrest of Mingxu Xi. And a suitable reason was found - attempts to bypass the rules of the Hong Kong Exchange (HKEX) by a reverse takeover of LEAP Holdings Group Ltd OK Group, which was headed by Star Si.
What was the trick? OKEx shares did not meet the requirements of the Hong Kong Stock Exchange, so they could not go through the listing procedure. LEAP shares have already passed it. However, right now the company was going through a difficult period, having lost almost 80 percent of its capitalization since 2018.
Therefore, Mingxu Xi buys out LEAP for $ 64 million and becomes the owner of 3.2 billion shares of the company, which he starts trading on HKEX, instead of OKEx securities. This happens regularly - the procedure is called a backdoor listing and is generally considered legal. Not in this case, however, as the new shares were used to circumvent mainland China's ban on trading on China's WeChat, Alipay and OTC accounts.
So the authorities detained Mingxu Xi, and also gained access to the secret keys - to begin the procedure for checking and searching for evidence of the violation.
The market reacted quickly - OKEx's capitalization immediately lost 2.7 percent, and confidence in centralized exchanges was shaken. But the volume of trading on decentralized ones has grown, for which such blocking of cryptocurrency wallets is generally impossible.
The position of the Chinese authorities on cryptocurrencies, in general, is perhaps the most tough - trade is possible only with full state control. And all attempts to circumvent these restrictions are naturally punished. And given the difficult situation in Hong Kong, it is not surprising that its authorities went to meet the Chinese side. We will follow the development of events.
Published on the EXBASE.IO based on materials from cryptor.net