Vircurex halts withdrawals and freezes accounts
Beijing-based Bitcoin and altcoin exchange Vircurex has made an announcement that they have stopped withdrawals for Bitcoin (BTC), Litecoin (LTC), Feathercoin (FTC) and Terracoin (TRC). All incoming deposits will also not be credited at the time being. On March 24th the exchange will freeze the current BTC, LTC, FTC and TRC in these accounts until the exchange can redistribute available coins to the users.
Vircurex was hacked twice last year resulting in a large loss of coins. The exchange promised to reimburse users whose balances were affected by the hacks from their own pockets. The plan seemed to be working fine until recently.
A statement on its website explains:
We had enough coin balances in our cold wallet to upkeep our platform and the positive cashflow enabled us to gradually refill the wallets.
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.
Due to the fund depletion, Vircurex are forced to either shutting down with significant unrecoverable losses for all customers, or consider taking drastic steps to allow the exchange to continue running while the funds are paid back to customers gradually. Rather than filing for bankruptcy, as MtGox did, Vircurex chose to keep going, and came up with a strategy.
Vircurex will put all current balance of coins under Frozen Funds in order to mark the funds that will have to be paid back to users over time. In doing so, all accounts will be set to zero balance with immediate effect.
It seems all is not lost as the exchange will use the current available cold storage funds to pay back some of these frozen funds according to the distribution logic outlined on their website. Monthly net profit will be used to pay back users in accordance to the same logic as well.