A redditor is taking legal action against FCOIN exchange after their research revealed large-scale fraudulent behavior.
Last week the Ethereum network slowed to a crawl, with the cost of transactions rising exponentially as users fought to beat the clog. According to one Reddit user, the Singapore-based FCOIN exchange, backed by former Chief Technical Officer of Huobi, Zhang Jian, was to blame.
The user, u/ltcisking, alleges that the FCOIN exchange pumped a staggering six billion bot transactions daily to manipulate the price of its native fcoin token.
“Spend a few minutes on fcoin usdt trading pair (hereafter, FT), or any FT pair for that matter, and it is clear to see the rampant levels of botting being done. Orders of 5, 7, 10, 15, 20 fly across the screen such that over 6 billion usd in “transactions” can be completed in a 24 hour period on FT alone.”
Under US law such market manipulation is considered fraud. As the exchange is based in Singapore, which uses a legal system similar to England’s, the user believes a legal case may be possible. With this understanding the user is looking for a legal team to file suit against the exchange, and has asked anyone who has been affected by the exchange’s practice to get in contact.
While it is not yet clear exactly what happened, and no information has been provided citing the value of funds affected, the event highlighted the current limitations of the Ethereum network. Just as Cryptokitties mania did earlier this year, the spamming of transactions slowed the Ethereum network to a standstill. Every transaction on the network needs to be mined, a time-consuming process which can cause a bottleneck under times of high load. Ethereum, while perfectly functional under normal conditions, has struggled in situations like this. It has brought to the forefront the importance of addressing the scalability of the network. Developers have made scalability a priority, and solutions such as sharding are expected to boost the network to 1000 transactions per second or more.
With more and more users joining the network as cryptocurrency awareness spreads, time is ticking for Ethereum developers who working to resolve the platform’s current scalability limitations.