Confidential strategies reveal that OKX, one of the world’s leading cryptocurrency exchanges, has been anticipating a settlement with U.S. authorities for quite some time. This became evident when the company announced a significant settlement exceeding $500 million with the U.S. Department of Justice (DOJ) after failing to obtain a money transmitter license and allegedly facilitating over $5 billion in suspicious transactions and criminal proceeds.
Understanding the Crisis Management Framework
OKX’s comprehensive crisis management plan provides insight into how the company has approached this high-stakes situation. A document obtained by CoinDesk outlines a specialized “SWAT Team” dedicated to managing communications during the settlement announcement and beyond. This team is designed to advise top executives on how to effectively communicate through social media and press interactions.
In preparation for the settlement, OKX developed detailed guidelines on how to engage with the DOJ and the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). A core element of their strategy emphasizes the notion that the entire cryptocurrency industry is under intense regulatory scrutiny, and highlights OKX’s commitment to full cooperation with regulators. This sentiment was reiterated in the company’s press release, which expressed appreciation for the DOJ’s collaborative approach.
Navigating Changing Regulatory Landscapes
The regulatory landscape for cryptocurrencies has shifted notably since the start of the Biden administration, with agencies like the SEC softening their enforcement tactics. However, for OKX, the situation remains challenging, mirroring the experiences of other exchanges like Kucoin and Binance, which have also faced hefty settlements this year.
The internal guidance document outlines specific expectations for OKX’s founder, Star Xu, President Hong Fang, and other executives in managing their communications, particularly in relation to the OFAC settlement. For example, if questioned about the company’s interactions with sanctioned markets, executives are advised to emphasize that any such customers were a minor part of their user base due to previous weaknesses in compliance controls.
Maintaining Brand Integrity Amidst Challenges
In addition to crisis management, OKX is also focused on preserving its brand reputation through high-profile sponsorships with organizations such as Manchester City football club, the McLaren Formula 1 team, and the Tribeca Film Festival. Over the past three years, the company has invested approximately $100 million annually in these partnerships.
To ensure a smooth narrative, the marketing chief is instructed to reach out to each brand partner shortly before any regulatory news breaks. The recommended messaging is that the company was prepared for regulatory scrutiny and chose to keep information confidential due to ongoing inquiries.
Navigating Sensitive Topics with Care
The planning document also underscores the importance of carefully handling discussions related to OKX’s native cryptocurrency, OKB. Given the fallout from the FTX collapse, there are concerns about any implications that OKB has been used as collateral or for operational financing, similar to what occurred with FTX’s FTT token.
Although OKB has not faced the same issues as FTX’s token, it did experience significant volatility in January 2024, leading to a flash crash that prompted OKX to compensate affected users. The company later made staffing changes, reportedly “sacrificing” key executives following the incident. Consequently, the communication protocol emphasizes that executives should avoid mentioning OKB unless specifically asked.
Strategizing Media Relations
Effective media management is another critical component of OKX’s plan. In the event of inquiries from journalists about ongoing investigations, the crisis management team is instructed to take proactive steps to buy time, such as providing leadership schedules to delay responses.
The goal is to contact favorable media outlets to create a positive narrative that counters any negative press. The strategy includes queuing internal and external communications to ensure a synchronized response as news breaks.
As of now, OKX has not issued any comments regarding the situation, but their strategic approach underscores the complexity of navigating regulatory challenges in the cryptocurrency space.
