Crypto exchange OX.FUN is battling allegations of extortion after X messages were shared suggesting it has agreed to conditioning return of $1 million in frozen user funds in exchange for positive social media promotion.

Direct messages shared on social media by artist collective JefeDAO on Sunday purportedly show that an OX.FUN representative offered a structured repayment plan of $200,000 monthly for five months, provided the affected user and others delete negative posts. On top of that, the rep wanted posts promoting the OX.FUN platform.

"This is blackmail," said the artist collective, JefeDAO. It claimed the exchange froze the funds after the group had been accused of market manipulation.

OX.FUN maintains that JefeDAO conducted an "oracle manipulation attack" through aggressive selling of Jailstool tokens—the meme coin promoted by Barstool Sports founder Dave Portnoy—and claims the group violated its terms of service.

Neither Ox.fun nor JefeDAO responded to a request for comment from Decrypt.

"The user had his very first deposit of 1 million USDC on February 14, and within minutes started to sell JAILSTOOL aggressively," OX.FUN said in a statement on X, describing trades that allegedly pushed prices down before Jefe "closed short positions immediately at as low as 0.034."

OX.FUN’s statement was tagged on X with a community note which said the exchange “is holding $1,000,000 USDC without evidence beyond their claims,” adding that it was “using the funds for extortion,” and “should be treated with caution without proof.”

Community notes on X appear “when rated helpful by others,” according to the Elon Musk-owned platform’s description.

The dispute has raised broader concerns about the exchange's financial health.

On-chain analyst and Coinbase director Conor Grogan claims OX.FUN holds less than $1.7 million in liquid assets outside its native token. He was citing a dashboard from Arkham Intelligence.

Neither Grogan nor Zhu responded to multiple requests for comment from Decrypt about the allegations.

The controversy has drawn industry attention due to Grogan pointing out that OX.FUN has direct connections to Zhu Su, co-founder of failed hedge fund Three Arrows Capita (3AC).

Prior reporting from Decrypt in early 2024 indicates that Zhu Su, along with 3AC co-founder Kyle Davies, are involved in the creation of OX.FUN, with said platform using the same OX tokens as OPNX, their previous venture.

Edited by Stacy Elliott.

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