Communication and relationship between client and Exchange is regulated by User agreement, which every user accepts at registration. There is no way to register without accepting the user agreement. However, rarely, some clients ignore and flagrantly breach the User agreement.
For the first time of violation of rules, we just warn client, but in case of repeatedly violations, account may be blocked for verification and further investigation. But, even in this case, we allow to withdraw all funds after the removing of false information and consequences caused by this publication. In some cases, verification may be required by the security team.
This is exactly what happened to the said client. This client created a ticket with a demand to enable withdrawal of MONA for his account, what is absolutely impossible because of the attack on the MONA network and public refusal of the developers to bear responsibility for that. We replied to the client with the explanation regarding MONA asset, but he decided to start spreading false allegations, publicly accusing the Exchange of fraud, and thus misleading the other clients.
The client is clearly provoking a conflict, ignoring all suggested options of settlement. Earlier this client said that all information, violating the user agreement had been removed, but the investigation found out that, on the contrary, there is much more such information now. All further discussions of this issue will be held solely with the client and only after eliminating all negative effects.
I have been involved in managing altcoin projects before. I know exactly the game you are playing here as I have had it perpetrated on the project I was involved in multiple times, usually by exchanges that failed not long after. You most likely didn't devote enough resources to running enough nodes to secure your own transactions on this network like every reliable and competent exchange does. As a result an event that is a known possibility on pretty much every cryptocoin combined with your own negligence and or misunderstanding (real or feigned) resulted in your exchange suffering losses. You probably don't have any kind of reserves or contingency plan set aside for these purposes, so rather than taking responsibility and correcting your own internal policy and security measures you attempt to blame the development team because they are an easy target and most people don't know enough about the technical aspects to know any better. Temporary freezing of funds in order to do a roll back of some sorts on illegitimate trades is one thing. This is something else based in punitive and fraudulent actions.
The only way I see Livecoin reclaiming their reputation is as follows:
1. Release the frozen funds. If you don't have them either buy them on the open market or issue a secondary internal token exchangeable for the asset that can be traded on the open market, slowly destroying the tokens over time as you buy them back. Of course if you are locking a users account you should be releasing their actual funds, not an internal token as that has no value to some one who can not use the exchange. Acceptance of the secondary token should be voluntary. I would consider a time delay for redemption or an immediate 1:1 token issue to be an acceptable compromise which allows the exchange to make all of the users whole.
2. Stop locking people's funds for posting in violation of your TOS. People not engaged in fraudulent activity themselves should be able to withdraw their funds at any time. Sure you can put this in your TOS. I doubt it is legal but that really depends on your jurisdiction of incorporation. Regardless of your legal right to do so or not, once people hear about this inclusion to your terms of service, your exchange will be over. No one is going to trust an exchange where posting to social media about their problems with it gets their funds frozen. You are just giving yourself enough rope to hang yourselves with using this policy.
You know what really gives people confidence in an exchange? Seeing how they react to situations like this. Do they make the userbase whole or do they just point fingers in every direction but their own? Right now Livecoin is looking like a big fat fail to me, but there is still time to make an opportunity out of this situation. Do the right thing and set up a restitution plan. Even if it needs to happen over time your user base will respect you for it, and it will grow. They understand problems are to be expected in this industry. What they will not tolerate is the exchange making the user base bear all of the cost of its own mistakes.