Hong Kong bitcoin exchange MyCoin believed to be a $386M ponzi scheme
It’s been just two weeks since the bitcoin ecosystem celebrated news of the first regulated United States bitcoin exchange, launched by Coinbase. Today, the industry is once again being reminded just how important this level of oversight and scrutiny can be. The South China Morning Post reports that Hong Kong’s MyCoin exchange has shut down, taking with it as much as $386 million of investor funds.
Unlike most prior bitcoin scandals – of which there are many – the funds in question are not client trading deposits, but rather a form of equity investments. MyCoin was selling what it described as bitcoin contracts, under which the company would give its “clients” a return of 90 bitcoin ($19,080) after just four months on an investment of just HK$400,000 ($51,560). The victims are everyday citizens who authorities now suspect were the unwitting participants in a ponzi scheme. The company previously claimed that it had raised at least HK$1 million ($128,900) from 3,000 clients. Authorities have yet to corroborate this astonishing sum.
The Post now reports investors were promised to see their money more than double in four months, causing many to mortgage their properties for additional funds to invest. Others report being offered prizes like cash or Mercedes cars for recruiting additional investors. Investors were prohibited from cashing out their investments unless they recruited additional clients. The company hosted fundraising events at luxury hotels across China throughout the last year.
The biggest victim is believe to have invested HK$50 million ($6,445,000). Clients reportedly don’t have any physical documentation backing up their investment, only trading contracts on the MyCoin’s erstwhile exchange.
One female victim with the surname Lau, who lost $1.3 million, tells the Post, “No one seems to know who is behind this. Everyone says they too are victims … but we were told by those at higher tiers [of the scheme] that we can get our money back if we find more new clients.”
http://pando.com/2015/02/09/hong-kong-bitcoin-exchange-mycoin-believed-to-be-386m-ponzi-scheme/
http://news.yahoo.com/hong-kong-warns-over-digital-currencies-amid-alleged-042144223--sector.html
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