Margex Exchange on the Verge of Bankruptcy, Users Lose XRP Funds
Margex's Alleged Rugpull and Collapse: Semblances to FTX's Downfall
Crypto exchange platform, Margex, is reportedly on the verge of collapse following an alleged rugpull by the exchange that has left many users without access to their XRP funds.
The allegations and controversy began when an X user, “That Martini guy”, posted a tweet on the platform where he revealed numerous reports from users who had sustained substantial losses following their inability to access their funds.
Margex exchange is a crypto trading platform with over a million users popular for its unique feature of allowing users to leverage trades using any asset as collateral.
The issue according to “That Martini Guy” started when the exchange decided to delist XRPUSD and rollback XRPUSD trades citing the unexpected surge in demand for XRP and extreme market volatility as the reasons.
The exchange which allowed the use of digital assets like XRP as collateral for positions were quickly forced to recall previously settled trades as a result of the huge number of short positions that were liquidated. This in turn caused the auto-deleveraging mechanism for the XRPUSD trading pair to malfunction. The failure to deleverage corresponding long positions led to counterparty entities incurring negative balances.
Margex Users on The Receiving End
Amid these events, numerous users who have incurred financial losses have taken to social media to call out the platform for the alleged rugpull.
“Cryptopainter”, an X user, accused the exchange of stealing his $280k alongside that of many other XRP holders.
“I had several XRP positions open from $0.60 and $200K in unrealized gains. Margex nullified all XRP trades on their platform. What’s worse? They clawed back my gains from previous weeks and locked my account, preventing me from withdrawing $80K worth of XRP not in trades. Now my account balance is $0,” he tweeted, warning others not to use the exchange as “they will steal your funds.”
Following the controversies, the exchange has allegedly suspended withdrawals, requiring extra fees to withdraw funds which strongly suggests a liquidity crisis at the exchange.
According to “That Martini Guy” the crash resulted in the exchange becoming insolvent as they struggled with the massive leverage buildup from the surge.
This bears a striking semblance to the FTX bankruptcy story. FTX was a leading cryptocurrency exchange that filed for bankruptcy in November 2022 after a large number of customers withdrew their funds from the exchange. The massive withdrawals came amid allegations that its owners had embezzled and misused customer funds.
