Tags: mycoin | ponzi | scheme

MyCoin Ponzi Scheme Got $386M, Claim Bitcoin Investors

By    |   Wednesday, 11 Feb 2015 09:54 AM

MyCoin, a Hong Kong-based bitcoin exchange, shut down its website and made off with $386 million in investor funds, and now some are saying it was a Ponzi scheme all along.

The South China Morning Post reported Monday that 30 clients of MyCoin have recently approached a local member of the Legislative Council, Leung Yiu-chung, saying they were robbed.

Certain details of the clients' interactions suggested to many that the exchange was a classic financial fraud.

"We were told by those at higher tiers [of the company] that we can get our money back if we find more new clients," said a woman surnamed Lau, who invested nearly $200,000.

Bitcoin news site CoinDesk.com reported that customers like Lau never received receipts for their investments, and were instructed to put their bitcoins on a separate site to earn interest.

While many investors the world over have been skeptical of the digital currency itself since it launched in 2009, experts say that the MyCoin incident doesn't seem to point to any inherent flaw in the bitcoin system.

"Reports say this wasn't a traditional exchange that was hacked, like Mt. Gox, but instead a business that provided some sort of contract that promised you a return, and some are surmising MyCoin was really running a Ponzi scheme based on Bitcoins," Reuben Grinberg, an attorney at Davis Polk & Wardwell, told CBS News.

"Oftentimes with new technology, where regulators haven't clamped down yet, scammers or people with bad intentions come in and start harming investors."

Many say that regulation will help stabilize and legitimize the bitcoin market, and one San Francisco-based bitcoin bank, Coinbase, touts its regulation by a handful of states as proof it's on the up-and-up.

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MyCoin, a Hong Kong-based bitcoin exchange, shut down its website and made off with $386 million in investor funds, and now some are saying it was a Ponzi scheme all along.
mycoin, ponzi, scheme
285
2015-54-11
Wednesday, 11 Feb 2015 09:54 AM
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