JPEX has begun to restrict withdrawals by converting user balances to a non-withdrawable cryptocurrency, according to reporting from The South China Morning Post on Oct. 4.

The publication referenced statements from an unidentified user who claimed that her Tether (USDT) holdings along with those of others had been converted into JPC, JPEX’s own token, rendering them unable to withdraw their crypto balances.

JPC has an unknown price and is impossible to withdraw, according to the user, who compared her new account balance to “waste paper.” Data from CoinGecko indicates that JPC has a drastically reduced value and is not traded on any recognized exchanges.

The South China Morning Post additionally suggested that JPEX is beginning to take steps toward implementing its decentralized autonomous organization (DAO) proposal — a plan that gained majority approval from voters on Sept. 28.

According to a JPEX announcement quoted by the SCMP, the proposal includes a shareholder dividend scheme that will allow investors convert funds into DAO stakeholder dividends at a 1:1 ratio. Those dividends, which can be claimed after two years, include listing fees, trading fees, and JPEX cryptocurrency tokens.

Details remain unclear

While JPEX has officially confirmed its plans to transform into a DAO, the company has not publicly stated or confirmed that it has forcibly converted user assets.

Some of the earliest customer complaints received by the Hong Kong Securities and Futures Commission (SFC) in September indicated that JPEX user account balances had been reduced and altered. As such, it is unclear whether the alleged forced conversions are related to earlier issues or to the DAO plan. The recency of the latest report also leaves it unclear whether JPEX is converting user assets on a broad scale.

JPEX has experienced extreme difficulties since the SFC published its first warning on Sept. 13 alleging that the exchange is operating without registration.

Since then, authorities have arrested at least 18 individuals involved with JPEX including social media influencers. Meanwhile, telecom companies have blocked access to the platform, and JPEX’s third-party partners have denied the company access to assets.

In response, JPEX has suspended a number of its own services and has told Hong Kong users to stop depositing assets while insisting that it will remain operational.