Cryptocurrency exchange Vircurex halts all withdrawals to avoid insolvency

The Beijing-based Bitcoin exchange Vircurex has halted all “BTC, LTC, FTC and TRC” withdrawals in an attempt to solve serious financial issues caused by two attacks that happened in 2013.

To avoid insolvency – and the path “chosen” by the bankrupt Mt. Gox – the platform has also decided to freeze all the existing users accounts.

The company has been using its cryptocurrency reserve to reimburse users whose balances were affected by the previous hacks, The Next Web reports. “We had enough coin balances in our cold wallet to upkeep our platform and the positive cashflow enabled us to gradually refill the wallets. Unfortunately we had large fund withdrawals in the last weeks which have led to a complete depletion of our cold wallet balance and we are now facing the option of either closing the site with significant unrecoverable losses for all or to work out a solution that allows the exchange to continue to operate and gradually pay back the losses”, explains a statement published online by Vircurex.

But halting the withdrawals was just the first stage of the process, as the company’s recovery plan has more steps. First, Vircurex will “introduce an additional balance type called ‘Frozen Funds'”.

Funds in this balance type cannot be used to trade or withdraw. Those are the balances that the exchange will gradually pay back and hence transfer back to the available balance over time.

Second, they “will move all current balances for BTC, LTC, TRC and FTC to the ‘Frozen Balance’, i.e. your balance will be set to zero”. Then the exchange will “take the current available cold storage balance and distribute it based on the below described distribution logic [50% of the amount will be distributed top down and the other 50% will be distributed bottom up]”.

And finally Vircurex will “take the net profit of the exchange and credit back that amount distributed to the users based on the described distribution logic” on a monthly basis.

Vircurex guarantees that, thanks to its distribution logic, “all users will eventually receive their funds, though the timeframe depends on the monthly volume available”.