Bitget to issues legal letters over VOXEL incident, promises $20M user recovery

Crypto exchange Bitget will issue eight lawyers’ letters about the VOXEL/USDT trading glitch.

The platform has also committed to a $20 million user recovery fund to compensate affected traders.

The incident on April 20 resulted in the VOXEL token’s trading volume surging by more than 200% to $12.7 billion, surpassing even Bitcoin’s volume of $4.76 billion on the same platform.

The anomaly was reportedly due to a glitch in Bitget’s trading system, allowing users to make significant profits within a narrow price range. Some traders reaped six-figure profits by using just $100. 

Since then, the exchange has focused on damage control and how it will compensate users who lost their funds.

Bitget will distribute the recovered funds to users through airdrops

Bitget identified professional wool interest groups tied to the eight accounts believed to be the main perpetrators of the VOXEL incident. The groups allegedly siphoned over $20 million from the platform, and Bitget claims it will send legal letters to them in succession.

The platform also stated it would distribute all recovered funds to users through airdrops. Additionally, Bitget claimed that, other than the eight accounts, all users who traded VOXEL between 16:00 and 16:30 on 20th April and withdrew their money would not be penalized. And on Wednesday, the platform even declared that all account functions were restored fully.

Bitget also promised to release a full accident report on the malfunction of the VOXEL trading system. 

However, some community members are displeased with Bitget’s handling of the situation. In response to their update, one X user commented, “If it is a normal transaction and not a bug caused by a technical attack, what is wrong with that? The correct solution is to look for the problem in yourself first.” Another user asked Bitget to shut down if it can’t manage its operations.

Moreover, a commentator even warned Bitget not to try to deduct funds from users who did not withdraw their money. He added, “ Also, let me say this: it’s not that easy to share the 20 million, so don’t even think about it, retail investors.”

Bitget’s hybrid custody model received a lot of backlash following the VOXEL incident

According to on-chain analyst Dylan, a malfunction in the Bitget bot repeatedly triggered trades within the narrow range of $0.125 to $0.138. The glitch caused some users to earn hundreds of thousands of USDT in just a few hours.

Following the incident, Bitget received a lot of criticism, seemingly losing community trust. Some have argued that the exchange’s decision to settle VOXEL contracts at discounted rates forcibly breached user trust. 

In addition, the platform’s hybrid custody model has come under fire following the incident. An analyst argued that the hybrid model places users at systemic risk and that no limits on position size invite market manipulation.

He also thinks Bitget’s response to the VOXEL incident was immature, unethical, and unprofessional. He claimed Bitget operates more like an offshore CEX with only simple KYC/AML requirements than an innovative centralized exchange.

Outside the controversy, Bitget remains one of the fastest-growing exchanges. The platform has over 100 million users worldwide and a daily trading volume of $20 billion. The project’s native token, BGB, has also surged massively, demonstrating investors’ belief in the project. ​

As the crypto space navigates the impact of the VOXEL fiasco, the community will be keen to see whether the exchange will stand by its promises to its users regarding compensation and legal culpability.

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now