Crypto exchange OX.FUN is currently facing allegations of extortion following the circulation of messages suggesting that it has agreed to return $1 million in frozen user funds in exchange for positive promotion on social media.
Direct messages shared by artist collective JefeDAO on social media on Sunday appear to show that a representative from OX.FUN offered a repayment plan of $200,000 per month for five months, on the condition that the affected user and others delete negative posts. In addition, the representative requested posts promoting the OX.FUN platform.
JefeDAO, the artist collective, described this as blackmail and claimed that the exchange froze the funds after accusing the group of market manipulation.
OX.FUN argues that JefeDAO engaged in an “oracle manipulation attack” by aggressively selling Jailstool tokens, a meme coin promoted by Dave Portnoy, the founder of Barstool Sports. The exchange also alleges that the group violated its terms of service.
Neither Ox.fun nor JefeDAO responded to Decrypt’s request for comment.
OX.FUN stated on X that the affected user made an initial deposit of 1 million USDC on February 14 and immediately began aggressively selling JAILSTOOL, causing the price to drop. According to OX.FUN, Jefe then closed their short positions at a low price of 0.034.
OX.FUN’s statement on X was accompanied by a community note, which claimed that the exchange is holding $1,000,000 USDC without any evidence and accused it of extortion. The note advised caution in dealing with the exchange until proof is provided.
Community notes on X are displayed when they are rated as helpful by others, as described by the platform owned by Elon Musk.
This dispute has raised concerns about the financial health of the exchange. On-chain analyst and Coinbase director Conor Grogan claims that OX.FUN has less than $1.7 million in liquid assets outside of its native token, based on a dashboard from Arkham Intelligence.
Neither Grogan nor Zhu, the co-founder of failed hedge fund Three Arrows Capital (3AC), responded to Decrypt’s multiple requests for comment on the allegations.
This controversy has attracted attention within the industry due to Grogan’s observation that OX.FUN has direct connections to Zhu Su, the co-founder of 3AC. Previous reporting by Decrypt in early 2024 revealed that Zhu Su, along with 3AC co-founder Kyle Davies, is involved in the creation of OX.FUN, which utilizes the same OX tokens as their previous venture, OPNX.
Edited by Stacy Elliott.