The death of a Chinese crypto founder

This is an adapted translation of an article written by Liu Jingfeng and Wang Lin for Ran Cai Jing and published on Sina Tech

Hui Yi died on June 5, 2019, though his passing wasn’t announced until the night of June 10 by his business partner and co-founder.

Hui, 42, had an excellent resume. He graduated from the University of Science and Technology of China, and worked for IBM at its China Research Institute as a researcher and then a senior researcher. In 2006, he joined Microsoft as a product manager on Surface, ascending to a senior level in that role. In the years after, he moved into entrepreneurship and founded blockchain data analysis platform Bte.top in 2017.

Photo credit: Pexels

Images of chat records passed around in cryptocurrency circles appear to show that Hui took approximately 2,000 BTC (worth about US$17.7 million, as of this writing) and used it to open a short position with 100x leverage (shorting is essentially betting against the price of an asset, hoping it declines or collapses). The result was a loss of US$16.3 million.

At the end of 2018, when the cryptocurrency market was down, Hui and co-founder Zhang Xintong were forced into broad-scale layoffs. Since then, Bte.top has stayed small, so there aren’t many people who were in close contact with Hui. His family has also not released information about his death, and there is some confusion about how he died, but it is widely speculated that he killed himself.

Big bet

Although Hui’s company was focused on blockchain market analysis and data services that include risk management, industry insiders allege that his death may be related to high-risk Bitcoin contract trades on the cryptocurrency exchange OKEx, which allows for Bitcoin margin trading and highly leveraged trades. And there is a pattern that points in that direction.

Hui Yi / Photo credit: Sohu News

In a blockchain trading group, Hui was pictured as saying that he’d been trading at 100x leverage, and had earned a solid profit by shorting the market, saying that he’d “opened up about 600 BTC of breathing room” (i.e., profit). After a “waterfall” pattern of Bitcoin price drops came on the morning of May 31, Hui posted around 1 pm that with an afternoon waterfall, he’d make enough to “not have to work in the second half of this year.”

It has been reported that shortly after making that post, he took 2,000 BTC of customer funds and used it to short the Bitcoin market with massive leverage. Trading with 100x leverage on a short means that just a 1% price rise is enough to liquidate the trader’s position. In the hours between 1 pm and 3 pm that day, Bitcoin rose 1.13%.

It’s not known precisely when Hui made his trade – if indeed that is what happened – but going by the Bitcoin price on that day, Hui lost an estimated US$16.3 million.

Startup pressures

Before Bte.top, Hui had earned a bit of a reputation as an escape artist in the realm of investments. He founded a loans startup during China’s peer-to-peer lending craze, but successfully withdrew before the bottom fell out. He also had a significant stock portfolio that he cashed in before China’s 2016 stock market crash.

Founded during cryptocurrency’s 2017 bull run, Bte.top got an enthusiastic reception from investors. The venture raised an A round in April 2018, although precisely who funded it isn’t clear. Bte.top’s website lists Japanese conglomerate SoftBank’s China arm as an investor. But SoftBank has stated that while its employees may have invested as individuals, there was no institutional investment in the crypto startup.