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MyCoin closes its doors, $387 million in investor funds vanishes

Bitcoin exchange MyCoin has vanished -- leaving up to $387 million in investor funds unaccounted for.
charlie-osborne
Written by Charlie Osborne, Contributing Writer on
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Bitcoin exchange MyCoin has closed its doors, potentially leaving up to 3,000 investors out of pocket.

The closure of the Bitcoin exchange was originally reported by the South China Morning Post on Monday. MyCoin, a supposed Hong Kong-based virtual currency trading exchange, has reportedly closed its doors leaving as many as 3,000 local investors with combined losses of HK$3 billion ($387 million).

Bitcoin exchanges are no stranger to closures and controversy. The most famous example is that of Mt. Gox, once one of the dominant Bitcoin exchanges online. Tokyo-based Mt. Gox closed its doors without warning in February last year, filing for bankruptcy and leaving investors approximately $500 million out of pocket. The closure of Mt. Gox was followed by others struck by cyberattack, including Flexcoin, Poloniex and Bitcurex.

See also: Police suspect Mt. Gox Bitcoin theft was an inside job

However, MyCoin's case may be different. Approximately 30 MyCoin clients are filing reports with local police that MyCoin was less of a Bitcoin exchange and more like a pyramid-style Ponzi scheme.

MyCoin customers were promised up to HK$1 million as a return on their money in four months for buying a HK$400,000 Bitcoin contract. The contract, which was meant to produce 90 bitcoins on maturity, also encouraged clients to lure others to the fold with new customer recruitment rewards such as extra profit, prizes and cars.

No customer was given written proof of their investment, and in December, MyCoin changed its trading rules -- forbidding clients from withdrawing their virtual currency unless they recruited other customers.

One MyCoin client, who has lost HK$1.3 million ($168,000) in four Bitcoin contracts, told the publication:

"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."

Last month, MyCoin closed its local office in Tsim Sha Tsui, saying the closure was due to "renovations." There has been no official response from MyCoin over the allegations.

An addition report by the South China Morning Post says that the firm's sole listed director left the company one month before MyCoin changed its trading rules. The director has been replaced by Wong Lok-yan, a woman who is listed as a director for 167 companies. In addition, William Dennis Atwood -- the only director of Rich Might Investment, where many MyCoin clients penned their cheques to -- resigned in November last year.

At the time of writing, the value of Bitcoin is rated at $215, far lower than last year's price of over $1,000 per BTC.

Read on: Cryptocurrency, Bitcoin

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