Zeniex, a South Korean cryptocurrency exchange will soon discontinue its services due to increasing governmental crackdown on unauthorized crypto exchanges.
November 19, 2018 | AtoZ Markets - A South Korean cryptocurrency exchange, Zeniex, which opened the country’s first crypto investment fund, has published a post on its official website on November 9, 2018, stating that the government pressure on the industry will be a challenging feat.
Zeniex Closes Down Due to Government Pressure
The crypto exchange, which was unveiled in May 2018, by a joint project of South Korea and China has disclosed in the post that it will cease all operations on November 23 and then blamed the development on the problems facing its ZXG token. The statement reads as follow:
“With recent issues regarding ZXG, we have gone through great deliberation both internally and externally. As a result, we have come to the conclusion that continuing to operate such a service will be difficult. We sincerely apologize that we were unable to meet the expectation of our Zeniex users and supporters.”
Withdraw Now or Lose Your Cryptos
Following this announcement, Zeniex customers are advised to withdraw all their cryptocurrencies deposited with the exchange prior to the deadline, as the service will then be unavailable.
Zeniex, furthermore, had also launched the cryptocurrency fund, the ZXG Crypto Fund 1, which seems to have been the cause of the problem. In October, South Korea’s financial watchdogs, the Financial Supervisory Service (FSS) and the Financial Services Commission (FSC) warned investors to tread cautiously with digital currency funds as that the Capital Markets Act protections do not apply to such assets.
Due to the warnings from the local regulator, Zeniex has made a separate announcement stating that it will also close its service on the Zxg Crypto Fund No. 1. Earlier, the firm expected its ZXG token to be listed by international exchanges, nevertheless, the decision was then canceled, as per the press release:
“We believe that ZXG Crypto fund No 1. will have difficulties to operate smoothly with such current pressure from the financial authorities.”
Regulatory Violations
According to a local finance newspaper, Business Korea, Zxg Crypto Fund No. 1. was unregistered with the FSS and the regulator had neither audited the fund’s financial investment guide. This was seen as an outright violation of the law since South Korea’s Capital Markets Act requires that all funds undertake registration with the regulator.
However, a representative of the firm told Maeil Business Newspaper, a South Korea’s main daily business newspaper, that although funding was through its platform, offshore management firms conducted the recruitment and issuing of the tokens.
The representative further stated that Zeniex was not obliged to report to the authorities as it had raised less than one billion won ($884,500) in total. Nevertheless, the FSC started an investigation against the crypto exchange, citing the inability to investigate if the platform is operating as claimed.
AtoZMarkets has, however, learned from the second notice released by Zeniex, that users of the token will now receive their compensation in Ethereum starting on November 12.
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