The story of Coinzest — is it planned bankruptcy or a falsified rumor?
Korean cryptocurrency exchange Coinzest is at the center of controversy as its won currency withdrawal has remained blocked for months since last August. In October, Coinzest CEO Jeon Jong-hee attended the parliamentary hearing of the Korea Communications Commission to state his stance on the issue. At the event, Liberty Korea party lawmaker Song Hee-kyung raised the possibility and concerns of Coinzest going bankrupt. Coinzest once surpassed the transaction volume of Korea’s largest cryptocurrency exchanges. How did the company end up in its current state? From a computer parts seller in Yongsan to Korea’s first mining cryptocurrency exchange Coinzest started out as Zest Electronics, a computer parts seller in Yongsan which used to be Korea’s largest haven for computers and equipment. Using its components, the company was once involved in the cryptocurrency mining business when the industry was at its height in Korea. Later on, in June 2018, it launched a cryptocurrency exchange named Coinzest. As Coinzest was a latecomer to the industry at the time, many expected the company would have growth limits but the business turned out to be a huge success. There are multiple reasons behind its rise, but the biggest factor was that it was Korea’s first mining cryptocurrency exchange — which has the concept of issuing its own coins and distributing them to its customers. It rewarded customers in the form of transaction fees and giving out dividends if users possessed the exchange’s coins. Coinzest’s cryptocurrency was COZ. As COZ prices shot up, rumors spread among investors, prompting transaction volumes at Coinzest to rocket in a short period of time. Its peak was between July and Aug. 2018, when COZ prices jumped 150 times. In other words, if one had invested 10,000 won in COZ in July and sold it off it August, they could have walked away with 1.5 million won. A cryptocurrency exchange’s worst nightmare — withdrawal suspension Controversies surrounding Coinzest’s coins and its methods of exchange aren’t new, but still it was regularly offering the deposits and withdrawals — the core functions of cryptocurrency exchanges. The real problem came in August when the government stopped withdrawals of won and cryptocurrencies BTC, ETH and XRP. As the withdrawal suspension prolonged and rumors aggravated in online communities, CEO Jeon was called to the parliamentary hearing where Song asked questions on Coinzest restarting won withdrawals and the site’s planned bankruptcy. “We will restart won withdrawals,” Jeon said, adding that the company is not going through a “planned bankruptcy.” At the moment, Coinzest is allowing withdrawals for several cryptocurrencies but is still not enabling the service for the Korean won. Financial troubles prompted by the 3.7-billion-won tax? In November, rumors started to spread across online communities that Coinzest’s office is vacant. This once again put a spotlight on Coinzest not offering Korean won withdrawals. “Lending one billion won to Nexybit and an unexpected tax of 3.7 billion won from the airdrop incident made it difficult for us to offer normal withdrawal services,” said a Coinzest source. The “airdrop incident” took place in Jan. 2019, when Coinzest accidently airdropped We Game Tokens due to an error. This resulted in several users receiving different cryptocurrencies including bitcoin, which prompted its traded price on Coinzest to fall from 4 million won-range to around 990,000 won. This was one of several accidents in 2019 that led to complaints from its users. Their anger exploded when users had to purchase other crytpocurrencies at a high price and withdraw them in cash, instead of directly requesting withdrawals of Korean won. Several users are mentioning possibility reporting Jeon for perjury at the National Assembly based on his comments at the hearing. Coinzest is trying to soothe its users by promising it will “partly” enable Korean won withdrawal services in November.