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This article was published on November 1, 2019

Cryptocurrency exchange CEO ‘loses’ private key to user funds — claims it doesn’t really matter

He says it happened long ago, when Bitcoin was 'dirt cheap'

Cryptocurrency exchange CEO ‘loses’ private key to user funds — claims it doesn’t really matter
Matthew Beedham
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Matthew Beedham

Editor, SHIFT by TNW

Matthew is the editor of SHIFT. He likes electric cars, and other things with wheels, wings, or hulls. Matthew is the editor of SHIFT. He likes electric cars, and other things with wheels, wings, or hulls.

The founder of a Zimbabwean cryptocurrency exchange has apparently lost the password to his company’s wallet, preventing users from withdrawing their funds.

Tawanda Kembo, founder and CEO of Golix, is said to be claiming he lost the password for a cold wallet in May last year. According to a report from local news outlet Iharare, the wallet contained 33 Bitcoin about $300,000 at today’s exchange rate.

Loss of the password has reportedly been confirmed by two sources that previously worked at Golix.

What’s more suspicious is the timing of the indiscretion.

The password was allegedly lost during a time when customers were trying to remove their funds from the exchange after the Reserve Bank of Zimbabwe (RBZ) ordered Golix to shut down operations. Customers began withdrawing their cryptocurrency after the RBZ banned Bitcoin trading last year.

According to another source that worked at Golix, users that kept their funds on the exchange have not been refunded.

Kembo speaks out

What’s more, Golix is reportedly not communicating with its customers, its Twitter account hasn’t been updated since February.

However, following Iharare’s report, Kembo has spoken out to give his account of events.

In a guest post on Iharare, Kembo says that his company has “never been unable to process a withdrawal because of insolvency.” He said the claims customers have been unable to withdraw funds come from a 1 percent minority.

Kembo admits the company is not profitable right now, but that the company is stable and will be for “at least a couple of years.”

He then goes on to contradict himself and say that it is true that customers haven’t been able to withdraw fiat over the last year. He claims this is because cryptocurrency companies can’t access bank accounts in Zimbabwe.

This is in part true. The Reserve Bank of Zimbabwe has kept eyes on Golix for a number of years because it believed the exchange represented a risk for the country and it has fought continually to have it shut down. Which may explain why it can’t access bank accounts.

Kembo also claims that Golix “mostly never had any challenges processing cryptocurrency withdrawals.” According to him, issues arose because customers didn’t know how to use cryptocurrency. There’s no mention if Golix ever provided customer support on these occasions, though.

In regard to the lost password, Kembo doesn’t deny this, but claims the situation has been taken out of context and doesn’t affect Golix.

The Golix CEO says he was an early adopter of Bitcoin and the password he lost was connected to an account accessible only through a Linux terminal. He said the Bitcoin on the wallet was bought “dirt cheap,” as such, the actual value of the loss is not that large. It’s when the value is calculated against today’s exchange rate that the loss seems striking.

Kembo’s version of events suggest that this happened before Golix existed. The story doesn’t appear to corroborate with Iharare’s initial sources of losing the wallet in May 2018.

Given Kembo’s response, it’s unclear what exactly is going on at Golix. But considering its inability to process withdrawals and its continued battles with RBZ, I’d tread with extreme caution.

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