TLDR
- Crypto exchange OX.FUN, backed by Three Arrows Capital co-founder Su Zhu, faces insolvency accusations after a dispute with NFT artist JefeDAO over a frozen $1 million USDC deposit
- JefeDAO claims funds were wrongfully frozen, while OX.FUN accuses them of attempting market manipulation through an oracle attack
- Coinbase’s head of product revealed OX.FUN’s wallets primarily contain their own OX tokens, with USDC reserves potentially dropping to $1,000 after pending withdrawals
- The exchange denies all insolvency claims, stating withdrawals are processing normally and calling the situation “coordinated FUD”
- The incident occurs amid broader concerns in the crypto exchange sector, following recent hacks at platforms like Bybit and WazirX
A dispute over a frozen $1 million deposit has sparked concerns about the financial health of crypto exchange OX.FUN, a platform backed by Three Arrows Capital co-founder Su Zhu. The controversy began when NFT artist JefeDAO reported that one of its members could not withdraw their USDC deposit from the exchange.
The exchange, which specializes in gamified crypto derivatives trading, quickly responded to the allegations on February 24, 2025. OX.FUN’s management posted on social media platform X that all withdrawals were processing normally and accused JefeDAO of launching a “coordinated FUD” campaign.
All withdrawals are processing normally. This is coordinated FUD.
No users were affected by the actions of JefeDAO aside from JefeDAO. He attempted to exploit the platform, got all of his funds frozen, and now is attempting a social media campaign.
Nico will put out a… https://t.co/jJRyFSFkiL
— OX.FUN (@OXFUNHQ) February 24, 2025
Nicolas Bayle, the founder of OX.FUN, claimed that JefeDAO had attempted to manipulate the market through an oracle attack. According to the exchange, JefeDAO deposited $1 million in USDC on February 14, 2025, and then began aggressive selling of a token called JAILSTOOL.
The exchange provided specific details about the alleged manipulation attempt. They stated that JefeDAO placed $600,000 worth of orders at $0.048 and additional orders at $0.045 when the token’s market price was $0.05. OX.FUN claims this activity drove the price below $0.04, allowing JefeDAO to close short positions at $0.034.
JefeDAO has strongly denied these accusations. The artist revealed that Bayle had offered to return the frozen funds on the condition that JefeDAO would promote the exchange daily on social media. JefeDAO viewed this unusual request as a red flag, stating it was “highly suspicious for an exchange to request the promotion of their social media accounts as a condition to return someone’s funds.”
Adding weight to the concerns, Coinbase’s head of product, Conor Grogan, analyzed OX.FUN’s wallet holdings. His investigation revealed that the exchange’s wallets primarily contain their own OX tokens rather than other cryptocurrencies or stablecoins. Grogan warned that processing the pending $1 million USDC withdrawal would leave the exchange with only about $1,000 in USDC reserves.
The timing of this controversy coincides with broader security issues in the crypto exchange sector. Recent reports indicate that competing exchange Bybit experienced a hack resulting in the loss of Ethereum tokens. In 2024, Indian exchange WazirX suffered a major security breach, losing $235 million in user funds.
Inside the $1 Million USDC Freeze
OX.FUN maintains that the situation affects only JefeDAO’s account. The exchange states that the freeze on JefeDAO’s funds resulted from violations of their terms of service, specifically citing the alleged oracle manipulation attempt as grounds for the action.
The involvement of Su Zhu as an advisor has drawn additional attention to the situation. Zhu’s previous venture, Three Arrows Capital, collapsed in 2022, causing major disruption in the crypto market.
According to OX.FUN’s official statement, JefeDAO’s trading activities between 05:46:56 and 05:57:06 UTC on February 14 involved approximately $300,000 worth of JAILSTOOL tokens. The exchange argues these trades were deliberately designed to manipulate market prices.
Good morning OXFUN.
Over the past months, OXFUN has focused on becoming a premier and trusted exchange for users to trade assets. It is heartbreaking to see a group of bad actors attempt to profit off of illegal market manipulation and then proceed to attempt to tarnish…
— OX.FUN (@OXFUNHQ) February 24, 2025
Employee reports suggest the exchange’s remaining liquidity has dropped to approximately $180,000, though OX.FUN disputes this figure. The exchange continues to process withdrawals for other users, maintaining that operations remain normal.
The dispute has sparked discussions about exchange transparency and reserve requirements. While OX.FUN asserts its financial stability, the high proportion of its own tokens in its reserves has raised questions about liquidity management.
JefeDAO’s case has attracted attention from other crypto industry figures. Several analysts have pointed out similarities between this situation and previous cases where exchanges faced liquidity issues.
Current data shows that the price of OX.FUN’s native token has experienced volatility since the dispute became public. Trading volumes on the platform have also fluctuated as users monitor the situation.
The platform’s terms of service explicitly prohibit market manipulation and oracle attacks. OX.FUN cites these terms as the legal basis for their actions against JefeDAO’s account.
