OXFUN Under Scrutiny: Liquidity Crisis and Frozen Withdrawals

KEY POINTS

Origin and Controversy: OXFUN, founded by Su Zhu and Kyle Davies of the collapsed hedge fund Three Arrows Capital (3AC), faces renewed scrutiny after a high-profile user complaint.
Locked Deposits: NFT collective JefeDAO alleges OXFUN refused to process their USD 1 million withdrawal and demanded free promotional services in exchange for releasing funds.
Liquidity Doubts: Coinbase’s Conor Grogan questions OXFUN’s solvency, estimating the platform might have been left with as little as USD 1,000 in liquid assets after JefeDAO’s deposit.
Frozen Withdrawals: User reports indicate funds are inaccessible, with OXFUN citing undefined "policy violations" to justify the lock.
Opaque Operations: Rumors suggest movement of assets to unknown wallets, complicating tracing efforts.
Future Uncertainty: With trust waning and withdrawal requests growing, concerns mount that OXFUN may be on the brink of insolvency.

OXFUN Under Scrutiny: An Investigative Report

Background and Players

The centralized exchange OXFUN has come under heavy fire in the last 24 hours due to a surge of user complaints about withdrawal issues. OXFUN’s founders are Su Zhu and Kyle Davies — both closely tied to the now-defunct hedge fund Three Arrows Capital (3AC), which once managed up to USD 10 billion before its collapse in the wake of the Terra Luna ecosystem crash. While 3AC's liquidation thrust its founders into the public eye, Davies is rumored to have evaded legal consequences and remains out of sight.

The JefeDAO Incident

The most recent catalyst for OXFUN’s ongoing crisis occurred on February 23, when the NFT artist collective JefeDAO deposited USD 1 million into the exchange. Almost immediately, their account was locked, and any attempt to withdraw funds was denied. OXFUN responded with an official statement accusing JefeDAO of attempting to "create artificial hype" around what the exchange considers a "dead" memecoin, claiming this violated the user agreement. JefeDAO, however, vehemently refutes these allegations. They go so far as to accuse OXFUN of extortion, stating that the exchange offered to unlock their deposit only if JefeDAO would commit to five months of free promotional services on OXFUN’s behalf.

Liquidity Concerns and Expert Perspectives

Conor Grogan, Head of Product at Coinbase, has publicly raised alarms about OXFUN’s liquidity. Citing internal metrics, Grogan suggests that after the USD 1 million deposit from JefeDAO, the exchange’s genuinely liquid reserves might total a mere USD 1,000. If correct, this leaves OXFUN with little margin to process withdrawal demands, highlighting a potential operational crisis.

Further insider reports corroborate the severity of the problem, claiming that by 23:00 UTC on February 23, OXFUN’s total liquidity across its pools had dropped to roughly USD 180,000. Such a figure puts OXFUN dangerously close to insolvency, leaving user assets vulnerable should a wave of withdrawal requests continue.

Official Statement vs. Mounting Skepticism

Even as pressure builds, OXFUN continues to insist on its liquidity, maintaining that JefeDAO deliberately engaged in market manipulation. However, in doing so, the exchange has yet to reference a specific clause within its terms of service to justify freezing USD 1 million of user funds. The lack of transparent evidence to support these serious allegations has prompted rumors that OXFUN may be moving funds to off-exchange wallets, effectively obfuscating the true state of its reserves.

Adding to the skepticism, Su Zhu’s reputation—already tarnished by allegations of mismanagement tied to 3AC—overshadows OXFUN’s official assurances. Many in the crypto community note a steep decline in confidence, speculating that any further large-scale withdrawals may spark a full-blown liquidity crisis.

Looking Ahead

Despite Su Zhu’s repeated vows that user funds remain secure, the surge in withdrawal requests is fueling the exchange’s liquidity strain.

Given the founders' controversial history and the apparent rapid depletion of reserves, OXFUN’s ability to withstand this crisis is under serious doubt. Unless the platform secures emergency funding or dramatically replenishes its reserves, the situation may unravel quickly, leaving users in a precarious position.

UPDATE

In a surprising turn of events, OXFUN’s founders — who had previously stated that they would not return JefeDAO’s USD 1 million deposit — have partially refunded the funds. This move follows intense backlash on Twitter, suggesting that public pressure may have played a decisive role in forcing OXFUN’s hand.

Even more perplexing, OXFUN insists this partial repayment was always part of their plan, despite multiple earlier statements indicating a complete refusal to release any funds to JefeDAO. Given the stark discrepancy between these new claims and prior messaging, users and observers alike are left with lingering doubts about OXFUN’s honesty and consistency in handling user assets.

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