The Dark Side of ETC: Where Did the Coins Go?


The community is discussing the possibility that three popular cryptocurrency exchanges, Exmo, Livecoin and BTC-e, have pocketed customer ETC coins.

The discussion kicked off with alexlogin’s post on Bitcointalk titled “EXMO EXCHANGE SCAMMERS!”, where he lamented the exchange administration’s dubious behavior.

“The situation is like that, there was ether on exmo, not too much, but still. When the leap-frog with ether begun, when it divided into classic and the hardfork, those guys from the exchange made it look like server failure, and changed addresses to the newly forked ether, so no one could get ETC as the result.”

According to the topic starter, his query to the support as to why Ethereum addresses of the exchange’s customers were updated with no prior notice and provision of ETC tokens to certain ETC addresses (like Poloniex did), was futile. In particular, he provided an outtake from his chat with Exmo’s administration:

Alexei: Let’s be honest, was all this exchange failure stuff about stealing Ether Classic from users? If you don’t disprove it, I’ll do my best to spoil your reputation of an honest exchange.
Ex: No, it all has nothing to do with ether. Do what you will.
Alexei: Where are old etc addresses then?

ForkLog contacted EXMO for comments as to the situation.

“The user opinion is erroneous, the exchange didn’t pocket anything. The situation with Ethereum Classic at our exchange was essentially the same as at some others. Poloniex, once Ethereum was hardforked, opened ETC trades, and the fastest users just dropped ETC along with ETH just by running them between exchanges,” EXMO replied.

The spokesperson for the exchange added that Alexei was talking with him on social network, not with the exchange’s administration.

ETC marketcap and price history

Over the course of the discussion, it turned out that similar accusations had been also addressed to two other Russian exchanges, all of which are members of Russian internet Top-3: BTC-e and Livecoin. Each platform stated that ETC assets had been withdrawn to Poloniex by users before the option of ETC trading could be implemented.

Who Dunnit

According to the official statements by BTC-e and Livecoin, Poloniex and Ethereum Classic teams are to partially blamed for what occurred.

“We examined the situation in detail and came to the conclusion that either the ETC developers or Poloniex had to take over at least a minimum function of notifying all the other exchanges trading ETH to protect their ETC funds from loss. The quantity of such exchanges is not so high, no more than 15. We believe that to send 15 warning letters was quite capable,” Livecoin’s message reads.

“On the second day after the start of ETC trading, BTC-e received a notification from Poloniex, saying that we need to secure the ETCs in our ETH wallet. At the time of notification, most of these coins have already been sent to Poloniex by our users. So there were almost none of these coins in our wallet,” BTC-e said in its official notification.

The exchange’s statement also stresses that there had been no notifications as to the necessity of protecting ETC assets, so this manner of doing business is hardly a fair play from Poloniex and Ethereum Classic. Finally, BTC-e has called Ethereum Classic a scam:

“BTC-e’s official standpoint on this issue is as follows: Ethereum Classic in the current circumstances is a scam. The Ethereum community decided to implement the hard fork in order to switch to the new chain. All major pools and exchanges (including BTC-e) did exactly that.”

The forum’s users were not convinced with the arguments, as big money was at stake. There were some implausible hypotheses, like the one suggesting that the exchanges had got into a booby trap due to their own machinations with user funds. Thus, user Pe4kin assumed that after investing ETH in The DAO, the exchanges could withdraw only ethers of the main fork after the hard fork, but not the ETC that the hacker got. However, this is very unlikely, as the exchanges couldn’t have enough reserve funds to maintain operations like withdrawal in case of investing this much in the same asset. It is quite clear that liquidity of the DAO’s tokens wouldn’t have sufficed to withdraw such big amounts if that was necessary.

ForkLog also requested an official comment from BTC-e and Livecoin, however, by the time of publication only Livecoin give official comment.

“When issue occured in ETH community, developers played quite squarely: open discussion, voting, timeline etc. Hardfork was announced in advance by ETH developers.
On the other side, ETC developers have made no steps for fair play. They didn’t notify anyone involved in this business about development, about
ways of protecting funds, connection between blockchains, timeline or anything else. Frankly speaking, there is one word for describing such a
way of doing business, this word is a scam. If someone doing business in that manner, there is no guarantee that everything will be clear and
fair in future. That is why we are not going to add ETC to exchange. We’re not sure that no surprises will arise in future and we don’t want to jeopardize our clients’ funds”.

Ethereum Classic Emerges

Ethereum Classic is coordinated by the head of cryptocurrency news website Bitnovosti, Arvicco (known as Viktor Fomin on social media). Notably, he stated to Bitcoin Magazine that Ethereum Classic is but a reaction by a group of enthusiasts, developers and traders to Ethereum’s hard fork.

This may give rise to a question why Ethereum Classic’s creators and curators, who are on friendly terms with Russian and English languages, and capable of accessing the industry’s media space, failed to notify the community or the exchanges about possible problems and the need of protection for the coins.

The exchanges could have assumed that ETC coins were taken away as follows: once ETC became available on Poloniex, some users started buying ETH and depositing the tokens on Poloniex. After the assets were withdrawn as ETH, the ETC balance was automatically topped up, as private and public keys remained identical in both chains. If that is true, the situation is way more complex than “the exchanges did it”.

Discord in the Community

Ethereum’s creator Vitalik Buterin noted that he fails to see the original platform’s spirit in Ethereum Classic, and suspects that the entire ETC trading thing was inspired from outside the community.

“ETC market trading strikes me as having heavy support from external opportunists who had no prior involvement in ethereum in the first place,” he stated.

Meanwhile, some community members link Ethereum Classic to Barry Silbert, CEO of DCG, whereas Silbert himself was dismissive about such allegations and stated that he was buying ETC coins waiting for the moment when it would cost more than ETH.

Thus, the dispute around ETC and ETH mutates into exchange of accusations grounded only with uncertain guesses, and therefore expands the discord in the community.

Bottomline: Tons of Questions

Let’s just try to summarizer the situation around the old and the new ethereums, and find out whether such accusations are actually sound.

Once ETC trades were launched on Poloniex, the community just had to treat it as an established fact. No media announces, no announces on Poloniex, not anything elsewhere. As BTC-e stated, Poloniex just notified them of the need to protect user ETC tokens two days after the trading kicked off.

Apparently, the Ethereum Classic team failed to do any such thing at all. Livecoin and EXMO seem to share this vision. However, Kraken and Bitfinex never stated anything like that; Bitfinex even provided the relevant amount of ETC to all ETH holders.

This means that either Bitfinex used other security settings, or that the version of tokens taken away is just untrue. Possibly, the recent hack of Bitfinex also influenced the exchange’s desire to conceal the event. However, the details of the story are currently scarce, and this version is but an assumption.

At the moment, the following is certain:
1. The people behind Ethereum Classic didn’t want the community to be ready for ETC’s entry, therefore having a competitive edge of insider trading.
2. Those people didn’t urge developers to join the project to make it better than Ethereum. They used the original code, which allowed the recursive call attack. The latter, as we all know, was the primary reason for the current discord.
3. Poloniex didn’t opt to notify its users about the forthcoming addition of ETC. Why? There’s been no official answer yet.
4. Several major exchanges (BTC-e, Livecoin and EXMO) can’t provide their users with ETC tokens saying that the coins had been withdrawn over the first hours of trades on Poloniex. Currently, ForkLog is attempting to discover relevant evidence in the history of transactions on blockchain.
5. Users accuse the said exchanges of pocketing the coins, and provide different arguments for the version. In any case, people have lost their money they had every right to own, and nobody seems to be reimbursing them for the loss.

As a reminder, Ethereum Classic was positioned as a project meeting the original crypto-community principle of open and immutable blockchain that can’t be rewritten on discretion of a group of individuals.

In this context, it is completely similar to Ethereum, which had also been accused of centralized decision-making, media pressure and deviation from original values of the crypto-community.

The entire history of the ETC project just doesn’t comply with actual statements and activities. It is saturated with preliminary private agreements within a limited group of individuals. One may say that the project not just enhanced the discord in the community, but also “unburdened” wallets of regular users, which is sadly becoming a common practice in the crypto-industry.

It doesn’t matter whether the exchanges pocketed the ETC coins, or someone had them withdrawn. The reason for all that is in closed decision-making and absence of open information.

ForkLog continues monitoring the development of affairs. If you are aware of anything concerning the matter in question, or you’ve got proofs of any actions by the parties mentioned herein, please contact us at

by Eugene Muratov and Toly Kaplan

Found a typo? Highlight text and press CTRL+ENTER

Subscribe to our Newsletter


Related posts

Tags: ,