Collapsed crypto exchange ACX used $20M of customers fund for business loan

Investigation into activities of collapsed crypto exchange ACX reveals that it used over $20 million of customer funds as loan support for its parent company Blockchain Global, Sydney Herald reports.

Australian-based Blockchain Global launched the ACX exchange in 2016 after it failed to get listed on the Australian Securities Exchange for filing inaccurate and misleading information about its investors and financial position.

ACX exchange offered trading services for customers to deposit their fiat currency and trade cryptocurrencies. However, it pooled all customers’ funds into a single account and failed to keep a detailed record of each customer’s holding.

In October 2021, the crypto exchange froze withdrawals for customers as it went bankrupt and owed creditors up to $50 million.

Ongoing investigations at the Supreme Court of Victoria reveal that ACX took the funds deposited by customers and intermingled them with the company’s money. Subsequently, it made withdrawals from the pool to fund other business endeavors owned by Blockchain Group.

Former Blockchain Global CTO Jin Chen testified that the company’s record was poor as it could not distinguish between the bitcoin holdings of each customer.

Chen added that he was instructed by the company co-founder Allan Guo to transfer bitcoin from the pool of customer funds to other parts of the business.

“Allen instructed me to send 100 bitcoin to an employee at the time of Blockchain Global Ltd and I understood it was for a collateral purpose,” Chen said.

As a result, the company used over $20 million of customer bitcoin to fund its transactions while leaving the customers at a loss.

The court hearing has been scheduled to continue on Oct. 27, as it decides on how to recover the funds and make customers whole.