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Investors fear they may have lost up to $387 million after Bitcoin exchange MyCoin shut down this week, reports ZD Net.
The Hong Kong based cryptocurrency exchange is said to have closed down its offices in Kowloon last month, but has now fallen completely silent leaving 3,000 local investors in the dark.
While this isn’t the first time huge sums of Bitcoin have gone missing, worryingly for MyCoin investors the latest disappearance bears hallmarks of financial fraud. According to the South China Morning Post, MyCoin had been operating like a pyramid-style Ponzi scheme, aggressively selling BitCoin ‘contracts’ while encouraging investors to recruit others.
Each contract cost HK$400,000 ($51,588), with buyers lured in by the promise of a HK$1 million ($128,969) return within just four months. The exchange then changed its terms in December, preventing investors from withdrawing their money until they had signed up others.
One MyCoin client, surnamed Lau, stands to lose HK$1.3 million ($168,000) tied into four contacts. She told the South China Morning 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.”
MyCoin continues to be silent on the closure, and the company’s only listed director resigned last year, transferring his shares to a company based in the British Virgin Islands. Two customer service numbers go straight through to recorded messages.
Meanwhile, the value of Bitcoin is falling in other markets, currently rated at $215 – a huge drop from its historical peak of $1,124 in November 2013.
Author Kyle Ellison, ESET