14 DAY TRIAL // Vircurex, a Beijing-based crypto-currency exchange, has frozen withdrawals of Bitcoin, Litecoin and other coins.
In a move that is making everyone think of the beginning of the end for Mt. Gox, Vircurex has decided to freeze all existing user accounts after running into some financial issues.
Over the past year alone, the exchange has been hacked twice and has been using a reserve of coins to reimburse users whose balances were affected by the incidents. Over the past week, however, people have withdrawn lots of coins, leading to a complete depletion of its reserves, which means that it was basically left without funds to pay back affected users.
However, there’s a difference between Mt. Gox and Vircurex, as the latter company doesn’t want to just throw in the towel. Instead, it has a plan to pull through its issues.
“Unfortunately we had large fund withdrawals in the last weeks which have lead to a complete depletion of our cold wallet balance and we are now facing the option of either closing the site with significant unrecoverable losses for all or to work out a solution that allows the exchange to continue to operate and gradually pay back the losses,” reads a notice on the company’s site.
Now, Vircurex has planned a few steps. The first is to introduce an additional balance type called “Frozen Funds,” which cannot be used to trade or withdraw. These are the balances that the company will gradually pay back.
All current balances for BTC, LTC, TRC and FTC will be moved to the new category, so users shouldn’t be surprised to find their regular balance at zero.
The leftover coins in the company’s cold storage will be distributed to users through a rather easy-to-understand scheme. 50 percent of the amount will be distributed top down, and the other 50 percent will be distributed bottom up.
The approach means that all users will eventually get their funds back, although it could take a while before this happens. New deposits and users are not penalized, which means that the ongoing operations of the platform will carry on as usual.
The company promises to take the net profit of the exchange and credit back users with these amounts.
It’s unclear exactly how many users are being affected by the event since Vircurex hasn’t revealed the number of customers it has. It is clear, however, that it is doing its best to fix the situation.