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Hong Kong Bitcoin Scandal Leaves Investors In The Dark

Thursday, 12 Feb 2015 05:04 AM

02/12/15 5:04:29 AM

Bitcoin investors in Hong Kong may have lost millions of U.S. dollars after an operator there shuttered, thought to be a ponzi scheme front. Pamela Ambler reports.

Digital cash for the future or a haven for cryptocurrency con-men?

Bitcoin has been a controversial topic for years, but an alleged scandal coming out of Hong Kong is offering a stark warning to anyone tempted by promises of easy money.


“This used to be the home of MyCoin, the self-proclaimed bitcoin operator that promised a three hundred percent return on investment in the virtual currency. You can see the company logo has been torn off right here and the door is boarded up. A single sign is posted saying they are closed for renovation, but that was dated over a month ago. The investment platform is said to have defrauded investors of nearly 400 million U.S. dollars.”

Dozens of victims have assembled outside of police headquarters to file their case.

But Hong Kong’s thriving bitcoin community says MyCoin’s business had little to do with the digital currency.

Leonhard Weese, president of the local Bitcoin Association.


“For bitcoin traders this is a non-event. Because unlike with Mt. Gox where bitcoins disappeared, and where bitcoins did become stolen from a large exchange – that was a big thing, where people lost their bitcoins, that had an effect on the bitcoin price. In this case, people lost their Hong Kong dollars. So it doesn’t have an effect on the bitcoin price.”

Weese says there is a clear distinction between legitimate bitcoin exchanges and operations like MyCoin.


“At first, they were promised returns. Bitcoin itself doesn’t come with promised returns. But also, I don’t think they ever had a bitcoin mine. So they used the investments from new customers to pay out the returns from older customers. Now they were able to combine that somehow with a pyramid scheme, in which they gave a referral program to existing members, to increase their returns if they found new members. Which is also something that no serious investment product would be able to offer, because simply because they have more investment doesn’t mean they make a higher return.”

Hong Kong has one of the world’s largest clusters of bitcoin startups, many of them operating in the e-commerce field.

Bitcoin users can book flower deliveries and even pay for a night out using the electronic currency.

Aurelien Menant, the founder of Gatecoin, a licensed bitcoin trading platform.


“Here in Hong Kong, there is quite an international culture. We’re also very close from China. It’s also becoming one of the main bitcoin hubs. And here you have around forty to fifty bitcoin companies already. We see everyday more and more being created. I would say like ninety-nine percent of them are not scams.”

It’s a reassuring message, but Hong Kong’s monetary authority is advising people to exercise caution.

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