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Crypto Exchange Comes Up with Dubious Stablecoin to Refund Clients
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Nigerian cryptocurrency exchange Patricia has launched a native token called Patricia token (PTK). The platform has also converted user funds into the token, which is being marketed as a stablecoin pegged to the US dollar. The move has stirred up concerns among the crypto community, with some suggesting that the company might be planning an exit scam.
Patricia’s Recently-Disclosed Hack Happened in 2022
In late May Patricia suspended customer withdrawals citing a security breach. “Recently, our platform Patricia experienced a hack, exclusively affecting the retail trading application. Both BTC and Naira assets were compromised,” the company explained in an email.
The exchange said that it has identified the source of the breach and is pursuing legal action against the “syndicated group” responsible. However, three sources directly familiar with the matter have reportedly told TechCabal that the breach occurred in January 2022, resulting in an estimated loss of $2 million for the company.
The sources, who wished to remain anonymous, confirmed that Patricia partially suspended withdrawals when the breach occurred in January. Though customers could still deposit funds into the app, they could not transfer their crypto coins to other wallets.
Instead, Patricia offered to purchase these coins from customers and compensate them with cash to address the situation. This temporary solution remained in effect until March 2023.
They added that Patricia launched a new version of its app in April. On Instagram, the company said the new app, Patricia Plus, was necessary “due to a global congestion on the Bitcoin blockchain.”
The new app didn’t impose any limitations on withdrawals. Consequently, users initiated transfers of their coins to other wallets. This prompted the company to reintroduce a freeze on withdrawals. The sources claimed that the company’s custodial wallet had a shortage of 75 BTC due to the hack.
Patricia Converts User Funds to Newly-Launched Token
In a series of tweets on August 18, Patricia unveiled its native token called Patricia token (PTK). Native tokens are digital assets specific to a particular blockchain platform or exchange, created and issued by the platform or exchange itself.
The newly introduced token is marketed as a stablecoin with a 1:1 peg to the US dollar. The company has also reportedly converted the crypto holdings of its customers to the PTK token, raising concerns regarding a potential exit scam.
Local crypto community members have pointed out several alarming factors regarding Patricia’s introduction of PTK. For one, the token is absent from cryptocurrency aggregators such as CoinMarketCap and Coingecko. These platforms provide comprehensive information about tokens, including their real value, quantity, contract address, and blockchain of origin.
Furthermore, PTK does not exist on widely used blockchains that exchanges typically employ to launch native tokens. For context, PayPal’s recently launched stablecoin is accessible on the Ethereum blockchain.
All these red flags have convinced some in the crypto community that the exchange might be looking for an exit scam. “The major issue here is If u can afford to give people(converting their balance) a stable coin backed by Usd Then Why not just give them their tokens back?” one Twitter user said.
Other users also noted that the token seems like a scam as the team has not provided proof of reserves for their self-described stablecoin. “This seems like a scam before you can say your token is backed by the us dollar. There should be a proof of reserve,” one Twitter user said.
Since the high-profile collapse of FTX, once the third-largest crypto exchange in the world, there has been growing skepticism toward platforms that do not offer transparency. For this reason, almost all major exchanges have revealed their proof of reserves reports, a specific audit for crypto institutions wherein a third party assesses the assets they own against their debt, also known as “liabilities.”
This article originally appeared on The Tokenist
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