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According to a Coin Telegraph report, several MEXC users have recently complained on social media of random “clawbacks” or centralized withdrawal freezes and liquidations of funds.
User “Al Gore Rhythms” had $33,658 deducted from his spot account. When he pressed customer service about the deduction, a representative told him that MEXC had “taken measures to recover the losses incurred” due to “abnormal trading activities.”
Al Gore Rhythms shared some supporting evidence with the publication to back his claim that the exchange had deleted transactions from his transaction history, but it was not able to entirely verify his claims from them.
There have been reports of MEXC freezing customer accounts and seizing funds at least since early May when crypto fan @cryptonator1337 tweeted that several people he knew were affected.
The number of people getting problems with @MEXC_Official in the last few weeks is huge.
They also froze the account from a friend of mine.
He deposited BTC worth low six-figures in USD, bought XMR, and tried to withdrawal. The first withdrawal went out, however, after the…
— CR1337 (@cryptonator1337) December 23, 2023
More allegations of arbitrary MEXC customer clawbacks came at the end of February, with a tweet that the exchange promptly replied to. The tweet included a screenshot provided by trader CoackKCrypto who claimed the exchange pilfered him for $330,000 “due to abnormal profit”.
Dear Valued User,
Please be assured that users engaging in normal trading activities will not be affected. Should there be any concerns regarding our risk control measures, you are welcome to apply for an appeal. Our customer service team is available 24/7 to provide you with…
— MEXC (@MEXC_Official) February 28, 2024
Coin Telegraph also reported two alleged incidents of MEXC freezing customer accounts and liquidating their trades.
One of which was Hashmoney’s case, which gained traction on X.
I was not able to hedge my positions, reduce the margin or do anything at all. I requested the customer support that they may keep withdrawals restricted but shall at least allow me to trade so I can prevent my balance from liquidating. pic.twitter.com/n80AIhAGFW
— Hashmoney (@culturexbt) January 4, 2024
The exchange again replied promptly and promised Hashmoney “further investigation,” although there has been no update in the last two months.
MEXC and Other Offshore Exchanges
MEXC is an offshore exchange, like Binance, which means that it doesn’t get the same regulatory scrutiny as a publicly listed US company like Coinbase.
Many regulators and lawmakers are keeping a closer eye on the exchanges servicing US customers after the FTX collapse wiped out what was left of the crypto market following Terra’s collapse in 2022.
Multiple enforcement entities are investigating Binance for various alleged offenses relating to money laundering and fraud, including the Department of Justice, the Internal Revenue Service, the Commodity Futures Trading Commission and the Securities and Exchange Commission.
Stories of withdrawal freeze in the industry immediately call to mind the thick of crypto winter, when lenders and companies like Celsius, Voyager, and Vauld all froze customer funds to stop bank runs before filing for bankruptcy.
Still, many within crypto believe that these are hard lessons for the industry, but they serve as a reminder of the need for crypto to get back to its founding ethos of decentralization.