BitMart insolvency claim grows as withdrawals freeze before Aug. 26

BitMart is facing a fresh insolvency allegation after an OpenGradient co-founder said his market-making team cannot withdraw funds locked on the exchange.

BitMart faces a new insolvency allegation after an OpenGradient co-founder said his market-making team could no longer withdraw funds locked on the exchange. The claim adds to mounting questions about the platform's ability to process withdrawals during its phased wind-down, which ends all trading services on Aug. 26.

Matthew, a co-founder of decentralized AI network OpenGradient, said his market-making team has funds trapped on BitMart and questioned whether the exchange remains solvent. He alleged that BitMart continued encouraging token holders to lock funds on the platform about one week before halting related services, describing the timing as "shocking" and suggesting the campaign may have been intended to bring additional liquidity onto the exchange.

BitMart began its phased shutdown on July 26, stopping new registrations, crypto and fiat deposits, and new spot orders, while futures accounts entered reduce-only mode. All spot, futures and other trading services are scheduled to end at 01:00 UTC on Aug. 26, with platform operations terminating Jan. 31, 2027. The exchange says withdrawals remain available, though requests may undergo identity checks, source-of-funds reviews, wallet-ownership verification, and sanctions screening. Scandic Coin reported delayed withdrawals involving approximately 21,898 USDT and 926,635 SNC submitted on July 26.

Founder Sheldon Xia denied on Aug. 8 that the exchange had "run away," saying the core team was conducting an asset inventory and consolidating assets. But BitMart has not published a full proof-of-reserves report promised in May, leaving users without verifiable evidence of solvency as the Aug. 26 withdrawal deadline approaches.

US users face Aug. 8 withdrawal deadline

BitMart stopped registering new US customers in May 2022, but the exchange said some older accounts could still be linked to US residents. The company instructed affected US users to close positions, redeem assets, and withdraw their remaining crypto by Aug. 8 at 23:59 UTC, warning that accounts could face further restrictions after the deadline.

The Cayman Islands Monetary Authority said on Aug. 6 that BitMart and its related GBM entities "are not, and have never been, registered, licensed, regulated, or otherwise authorized" to run a virtual-asset business in or from the territory, despite the holding company's Cayman registration. The exchange's BMX token dropped close to 60 percent on the shutdown announcement, per CoinGecko data.

Proof-of-reserves remains outstanding

BitMart said in May it was preparing to publish proof of reserves after earlier withdrawal complaints. That report has not been released. Proof-of-reserves disclosures can help verify that exchanges control assets corresponding to customer balances, but they do not establish solvency unless users can also assess the company's liabilities and off-chain obligations.

The case resembles recent liquidity concerns involving AscendEX, where delayed withdrawals and apparently low hot-wallet balances preceded the exchange's shutdown. BitMart has not acknowledged any asset shortfall. For users unable to withdraw, the immediate questions are whether BitMart can publish verifiable asset and liability data and provide a clear processing schedule. Until then, the insolvency allegation remains unproven, while reports of frozen funds continue to test the exchange's claim that its wind-down is orderly.

This article is for informational purposes only and does not constitute investment advice.