OKX’s Anticipated Settlement with U.S. Authorities
Recent revelations regarding OKX, one of the leading cryptocurrency exchanges, indicate that the company has been bracing for a settlement with U.S. regulators for some time. This became evident on Monday when OKX announced a substantial settlement exceeding $500 million with the U.S. Department of Justice (DOJ). The settlement arises from the exchange’s failure to obtain a money transmitter license and its alleged involvement in facilitating over $5 billion in suspicious transactions and criminal proceeds.
The meticulous preparation by OKX is both intriguing and revealing. A confidential crisis management document, recently obtained by CoinDesk, outlines the creation of a specialized messaging “SWAT Team.” This team is poised to implement various strategies for communicating the settlement details through social media channels and during discussions with reporters.
Long before the announcement of this hefty fine and forfeiture, OKX had developed specific guidelines regarding potential settlements with both the DOJ and the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). A key strategy emphasized in the document is to highlight the broader scrutiny faced by the entire cryptocurrency industry and to assert that OKX is fully cooperating with regulatory bodies. This sentiment was echoed in Monday’s official press release, where OKX expressed appreciation for the DOJ’s collaboration.
Since the recent shift in administration under President Donald Trump, regulatory agencies have aimed to soften their previously aggressive enforcement approaches in the cryptocurrency sector. This has included the SEC halting ongoing litigation and closing investigations. However, OKX’s situation starkly contrasts this trend, as it joins the ranks of other exchanges like Kucoin, which faced a substantial $300 million penalty, and Binance, which encountered similar challenges in 2023, all resulting in costly settlements.
Executive Communication Strategy
The document also outlines expectations for OKX founder Star Xu, President Hong Fang, and other executives regarding their social media engagement in two scenarios: 1) if a leak occurs before the OFAC settlement, and 2) upon the formal announcement of the OFAC settlement. In response to inquiries regarding whether OKX has engaged with sanctioned markets, executives are advised to communicate that “customers from sanctioned markets slipped through when we had immature compliance controls and systems […] This represents a very small and insignificant part of the OKX customer base.”
Indeed, the press release from OKX on Monday acknowledged that U.S. customers were previously able to trade on its global platform. “The total number of U.S. customers involved – which are no longer on the platform – amounted to a small percentage of the Company’s worldwide customer population,” the statement clarified.
Brand Management Amidst Regulatory Scrutiny
Another focal point for OKX is the orchestration of its significant sponsorship deals with high-profile entities such as Manchester City football club, Formula 1 team McLaren, and the Tribeca Film Festival. Over the past three years, the firm estimates it has invested approximately $100 million annually on these partnerships. The action plan for managing brand partners includes a strategy where the OKX marketing chief contacts each partner “at the last hour before the news breaks.”
The recommended approach here is to communicate that OKX has been preparing for regulatory reviews amidst the growing scrutiny on cryptocurrency firms. If questioned about the lack of prior disclosure regarding the situation, the document suggests stating that these inquiries are pending and pertain to non-public matters. Additionally, there is a note indicating the necessity for the CMO and OKX’s head of legal to “review clauses in our brand partner contracts again.”
Handling Concerns over OKB
Another significant aspect highlighted in OKX’s planning document pertains to its native cryptocurrency, OKB. Following the fallout from the FTX incident, any implication that OKB has been used as collateral or to fund any operations of OKX raises serious concerns. While the OKB token has not faced the same controversies that plagued FTX’s FTT token, it did encounter a sudden flash crash in January 2024. In response, OKX swiftly offered compensation to users who incurred losses. Observations from blockchain analytics firm Crystal Intelligence, led by COO Marina Khaustova, noted that 10 previously dormant wallets became active just before the crash.
Subsequent to the OKB incident, OKX executives Tim Byun, formerly the CEO of OKcoin and head of global government relations, and Head of Product Wei Lan were dismissed from their positions. A source familiar with the situation indicated that Byun was “sacrificed” following the fallout from the OKB crash. Consequently, the communication protocol from OKX stresses that executives should “refrain from mentioning OKB and reference this only if asked.”
Media Relations Strategy
Another crucial element of the strategy involves managing media inquiries. In the event that OKX receives emails or phone calls from journalists seeking comments on ongoing investigations, the SWAT Team, along with the PR team, should spring into action to “buy time by offering up leadership schedules.”
Additionally, the plan stipulates that the team must “contact key friendly publications for a parallel story to seed in a complimentary narrative to the originating story.” The document outlines a three-step approach: “1. Push for delay; 2. Confirm friendly publications; 3. Asynchronously queue up internal/external communications, so we hit send as the story breaks.” As of now, OKX has not provided any comments regarding the situation.
