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Irate iCE3X clients plot legal action over missing Bitcoins

Read time 5min 50sec

Clients of under-fire crypto-currency exchange iCE3X are considering legal action after failing to retrieve their digital assets held up by the company.

This, as mystery still shrouds the liquidation of one of SA’s oldest crypto-currency exchanges, iCE3X.

At a time when most crypto exchanges are enjoying a purple patch, thanks to the meteoric rise in the prices of digital currencies, iCE3X last month announced it was taking the platform offline, claiming it was facing a shortage of Bitcoin and Litecoin.

Frustrated iCE3X clients still cannot make withdrawals on the platform and after trying to confront the crypto exchange via its Facebook account, iCE3X went on to close the social media page, angering customers.

ITWeb’s questions to Gareth Grobler, CEO of iCE3X, were also met with a deaf ear.

Some of the clients that ITWeb spoke to via Telegram indicated they are left with no option but to initiate legal proceedings against the company.

Their biggest concern, they say, is that they have not received any communication from the firm about when they will be able to get back their coins.

They also indicated they are in the dark in regards to how the liquidation process will be handled.

One of the clients, who preferred anonymity, says most of them believe there is some collusion between Grobler and Merkeleon, the company that provides technology backend services to iCE3X.

As the confusion continues, the clients believe Grobler and Merkeleon are plotting to swindle them of their money as there has been no meaningful communication about the “missing coins”.

No return

Earlier this month, the sinking iCE3X, on its Web site, said: “All withdrawals logged via the form (except BTC & LTC) up to and including 06/04/2021, for which we had the correct details, have been completed.

“All remaining assets (Tokens & FIAT) are now held in trust by Manong Badenhorst & Badenhorst Attorneys and liquidation proceedings have been initiated.”

Prior to that, the company had communicated: “We regret to inform you that the platform will not return to operation and that we have been advised to initiate liquidation proceedings.

“All withdrawals from the platform have been disabled, and we have processed the withdrawals which have already been submitted via the form, manually. We currently have no withdrawal requests pending for any currencies other than BTC and LTC.”

iCE3X held about 80 000 accounts.

“There’s a cloud of mystery surrounding iCE3X. What happened, how it happened, why it happened, and, perhaps, most importantly, who was in charge of their communications,” says Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives and digital asset exchanges.

“The stunning lack of competency in the exchange’s ability to communicate with their customers – or their lack of willingness to do so – is a primer in how to make a terrible situation even worse.”

Since withdrawals were suspended, the exchange shut down its Facebook page, prompting users to create their own page dedicated to planning their next move. The issue seems to be grounded in a dispute with the exchange’s technology partner.

The users’ page describes itself as: “A place for iCE3X traders to get together and strategise next steps in the wake of the management failure to protect our property and freeze Bitcoin assets.”

The clients have also created a group on messaging platform Telegram to vent their frustrations.

“When budding crypto-preneurs are looking for technology partners, they’re often looking at who can get them to market for the lowest cost,” Gardner says.

“Let’s be honest, this isn’t the first time an exchange got caught up in a technology debacle related to a vendor who didn’t have a strong background in financial technologies or exchange technology. Not all technology providers are made equal.

“At the end of the day, we are going to continue to see technology malfunctions until the industry, consumers, or regulators normalise a demand for reliable, safe, secure technology stacks. But, this goes beyond technology.”

Gardner points out that instead of getting in front of the issue, letting users know what happened and where they stand, iCE3X leadership threw up their hands and just let the chips fall where they may.

“That doesn’t inspire consumer confidence, and the investors who put their trust into that exchange deserved better. It is time that we, as an industry, really work to normalise good business practices, rewarding innovation, customer service and security.

“Crypto-currencies belong to a relatively new industry, and many regulators haven’t caught up to the technology yet, but that doesn’t mean we should be jockeying for position in the Wild West.”

Infamous cases

This is not the first time South African crypto-currency investors have been left hard done by in the burgeoning industry.

The infamous case of SA’s Mirror Trading International (MTI) has been crowned as the world’s largest crypto-currency Ponzi scam.

A total of around $589 million was lost, affecting hundreds and thousands of investors, according the Chainanalysis 2020 Crypto Crime Report.

In 2018, South Africans also lost big in the ill-reputed BTC Global, a crypto-currency scam that would dupe investors from across the globe of over $50 million.

For Wiehann Olivier, partner and digital assets lead at Mazars in SA, MTI’s illicit scheme using crypto-currencies to commit fraud has unfortunately overshadowed the thriving industry in SA and the rest of the world – and has given credible and reputable virtual asset service providers and participants in this alternative financial system yet another hurdle to overcome on the road to mass adoption.

He points out that SA’s Financial Sector Conduct Authority and other regulators across the world are constantly warning crypto asset investors to be extremely cautious and vigilant when dealing with, or investing in, these digital assets.

In most circumstances, Olivier says, regulators are issuing these warnings due to a lack of existing, formal regulations, as is the case in SA, where crypto-currencies remain unregulated.

“This lack of regulation, therefore, requires investors to do their own extensive research before investing in crypto-currencies, but also offers opportunity for fraudsters to prey on uninformed investors,” Olivier says.

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