OX.FUN's $1M USDC Freeze: Market Manipulation or Financial Crisis?

Crypto exchange OX.FUN, backed by Three Arrows Capital co-founder Su Zhu, has found itself in the midst of a controversy involving a frozen $1 million USDC deposit. The dispute with NFT artist JefeDAO has raised concerns about the exchange's financial health and sparked a debate about market manipulation and exchange transparency.

On February 24, 2025, JefeDAO reported that one of its members was unable to withdraw their USDC deposit from OX.FUN. The exchange quickly responded, stating that all withdrawals were processing normally and accusing JefeDAO of launching a "coordinated FUD" campaign. OX.FUN's founder, Nicolas Bayle, claimed that JefeDAO had attempted to manipulate the market through an oracle attack.

According to OX.FUN, JefeDAO deposited $1 million in USDC on February 14, 2025, and then began aggressive selling of a token called JAILSTOOL. The exchange alleges that JefeDAO placed orders at $0.048 and $0.045 when the token's market price was $0.05, driving the price below $0.04 and allowing JefeDAO to close short positions at $0.034.

JefeDAO has strongly denied these accusations. The artist revealed that Bayle had offered to return the frozen funds on the condition that JefeDAO would promote the exchange daily on social media. JefeDAO viewed this unusual request as a red flag, stating it was "highly suspicious for an exchange to request the promotion of their social media accounts as a condition to return someone’s funds."

Adding weight to the concerns, Coinbase's head of product, Conor Grogan, analyzed OX.FUN's wallet holdings. His investigation revealed that the exchange's wallets primarily contain their own OX tokens rather than other cryptocurrencies or stablecoins. Grogan warned that processing the pending $1 million USDC withdrawal would leave the exchange with only about $1,000 in USDC reserves.

The timing of this controversy coincides with broader security issues in the crypto exchange sector. Recent reports indicate that competing exchange Bybit experienced a hack resulting in the loss of Ethereum tokens. In 2024, Indian exchange WazirX suffered a major security breach, losing $235 million in user funds.