Orionx shuts down after $7M custody issues discovered
Orionx has ceased operations following a forensic audit revealing over $7 million in customer asset discrepancies, raising serious regulatory concerns.
Dylan Foster 2 min read
Orionx’s operational closure after custodial audit
Chilean cryptocurrency exchange Orionx is set to shut down permanently, prompted by an audit revealing over $7 million worth of customer assets transferred to external wallets not under the exchange’s control. Tether, noted for its issuance of the USDt stablecoin, had led a Series A investment in Orionx just 15 months prior, aiming to promote the uptake of digital assets in Latin America.
Audit reveals major discrepancies
The shutdown was confirmed in a company announcement shared on X, where Orionx declared its priority is now the return of client assets, which are currently suspended from withdrawal. The exchange’s financial discrepancies were highlighted by COO Thomas Mac Millan, who identified a ‘significant mismatch’ between the balances recorded in Orionx’s systems and actual custodial assets.
The forensic audit, initiated in response to these findings, compared internal records against verified blockchain data. It disclosed that balances for Bitcoin (BTC), Ether (ETH), XRP, and Polygon (POL) were overstated in Orionx’s systems. This incongruence raised questions about the management of customer funds.
Historical asset transfers raise concerns
According to various reports, including details from La Tercera, the problematic asset transfers reportedly occurred from 2018 to 2021, indicating a prolonged issue with asset management. The internal and forensic audits uncovered that accounts associated with Orionx’s founders had received significant transfers during this period.
Criminal complaints filed against founders
In light of the investigation, Orionx has filed criminal complaints against former executives Roberto Zibert and Joaquín Díaz, who had full access to the firm’s custodial systems. Allegations suggest that one account linked to Díaz received more than $1.5 million through 14 transfers, alongside a claim that another wallet accounted for the movement of 187 Ether, over 4.1 million USDt (USDT), and 200,000 USDC.
Tether’s role and regulatory implications
Orionx’s collapse signifies the complexities and regulatory challenges faced by cryptocurrency exchanges, especially those under oversight from financial authorities such as the Canadian Securities Administrators (CSA) and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). With the rise of regulations following events like the collapse of other platforms, the importance of audits and accountable management within exchanges has come under increased scrutiny.
Tether’s investment strategy, focusing on building a presence in Latin America through firms like Orionx, takes a significant blow with this incident. It raises questions about the level of corporate governance and operational transparency within crypto platforms, which are increasingly under the lens of regulators seeking to protect consumers.
Implications for the Canadian investor community
The fallout from Orionx’s operations may have repercussions not just in Chile but for Canadian investors engaged with holdings tied to Tether or similar platforms. It underscores the need for thorough due diligence in understanding the custody and management practices of cryptocurrency exchanges, especially as digital asset regulations evolve.
While the exact impacts on Tether remain to be seen, the situation highlights the critical nature of asset custody, investor trust, and regulatory compliance, which are paramount for the long-term viability of cryptocurrency exchanges operating in Canada and abroad.