Su Zhu-backed Ox.Fun dismisses insolvency claims amid JefeDAO feud

OX.FUN, the crypto derivatives exchange backed by Three Arrows Capital co-founder Su Zhu , rejected claims of insolvency in an announcement on Sunday.

"All withdrawals are processing normally," OX.FUN wrote in an X post. "This is coordinated FUD."

In its announcement, OX.FUN attached the social media post that claimed the insolvency. 

"Several now-former employees are reporting that [OX.FUN] is officially insolvent," said the X post from user "stevie_ravioli," with an attached screenshot that appears to be private messages from an OX.FUN employee laid off just hours prior. The former employee claimed that there was $180,000 left in the platform for withdrawals as of 23:00 UTC, according to the screenshot.

"So we were essentially triaging," the message from the screenshot said. "No idea how they plan on dispersing the last of the funds." However, the sender and recipient of the direct messages remained unclear.

The OX.FUN announcement did not address other allegations made in the X post such as the layoffs and the remaining amount of funds. 

Amid varying claims about the remaining funds at OX.FUN, onchain data platform Arkham Intelligence shows that OX.FUN has nearly $1 million worth of funds, mostly in its native token OX.

The Block has reached out to OX.FUN for further comments.

JefeDAO dispute

The exchange's troubles originated from its dispute with JefeDAO.

On Feb. 21, JefeDAO posted on X that one of its members deposited 1 million USDC into OX.FUN, but was unable to withdraw a few hours later. The platform allegedly stated that the user violated its terms of service without specifying the wrongdoing.

In response to JefeDAO’s post, Nicolas Bayle, founder of OX.FUN that also goes by nickname Nico, argued that a member of JefeDAO has attempted to exploit the platform, violating its terms and conditions.

"We do not tolerate bad actors — user protection remains our highest priority," wrote Nico, who added that the platform would need to communicate with the individual privately.

In a follow-up post on Sunday, JefeDAO claimed that Nico offered the return of 1 million USDC in exchange for extensive promotion of OX.FUN on social media on a daily basis.

"I literally know this is 100% fraud just based on the fact that it is highly unusual and suspicious for an exchange to request the promotion of their social media accounts as a condition to return someone’s funds," JefeDAO wrote . "OX.FUN is a scam exchange and I will keep posting until my funds are returned in full. This is extortion."

OX.FUN had argued that JefeDAO was orchestrating a "social media campaign" after its funds were frozen from the alleged attempt to exploit the platform.

Meanwhile, some members of the crypto community urged others to take action against OX.FUN by withdrawing funds out of the platform. This apparently led to a mass exodus of funds, resulting in claims of insolvency at the platform. 

"Everyone should remove [their] funds from OX.FUN immediately!" wrote one X user. "Now it's coming to light that OX.FUN is actually trying to extort JefeDAO for marketing purposes, attempting to force JefeDAO to negotiate with what boils down to Onchain terrorists."

At around 11:30 p.m. ET on Sunday, OX.FUN published another statement on X, arguing that JefeDAO performed an "oracle manipulation attack," where Jefe allegedly manipulated the market price using 1 million USDC. 

OX.FUN explained that JefeDAO started selling JAILSTOOL memecoin aggressively after depositing the 1 million USDC, placing large limit orders at prices below the token's fair price of $0.05. As the sales drove the token's price downward, JefeDAO closed its short positions on JAILSTOOL when it reached $0.034.

"This behavior is explicitly against our Terms of Service, is against the interest of other users of OXFUN, and thus his funds are frozen," OX.FUN wrote.

In a direct message to The Block, JefeDAO said OX.FUN's claims of market manipulation were false.

"It is clear OX FUN is trying to damage control after we rejected their extortion offer," JefeDAO told The Block. "If they believe we committed an 'oracle manipulation attack' (what even is that?) then why would they ask us to promote their exchange every day for six months? Clearly fraud."

OX.FUN was launched in January 2024 as a gamified crypto derivatives trading platform with Su Zhu and Kyle Davies as advisors . The two co-founded Three Arrows Capital, a crypto hedge fund that collapsed in 2022. It was later revealed that the company operated with insufficient risk management measures. 

This is a developing story.