Tech Industry

Bitcoin trader MyCoin shutters, taking $387M in investor funds

Hong Kong-based MyCoin has reportedly closed its doors, with suggestions the operation was a Bitcoin-themed ponzi scheme.

Bitcoin

As Bitcoin experiences global growth and more widespread adoption in peer-to-peer payment circles, one Asian Bitcoin trading company has swiftly closed its doors, leaving investors facing massive losses.

South China Morning Post reported the closure of Hong Kong-based MyCoin, which is believed to have left as many as 3,000 investors facing a total of HK$3 billion ($387 million) in losses.

But while Bitcoin has been hit with its share of issues in the past -- including the bankruptcy of the major Japanese Bitcoin exchange Mt. Gox -- this latest problem appears to be less to do with the vagaries and fluctuations of the world's most famous cryptocurrency and more due to classic financial fraud.

MyCoin clients were promised massive returns on initial investments -- as much as HK$3 million on a $2 million investment, which bought 7 "Bitcoin contracts". However, the company reportedly changed its terms of service last December, preventing customers from withdrawing their funds. In addition, clients were offered rewards for recruiting new customers to invest in the company -- behaviour consistent with the operation of a pyramid scheme.

One client vented frustrations over the loss of a HK$1.3 million ($168,000) investment.

"No one seems to know who is behind this," she said. "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."

When it comes to who is behind the collapse, there has been radio silence from MyCoin. However, further reports have emerged from South China Morning Post that MyCoin's sole listed director left the company one month before the non-withdrawal terms came into effect, only to be replaced by a woman who is listed as director for a further 167 companies.

MyCoin's information page stipulates that users could "top up" their accounts by transferring money to a company called Rich Might Investment Ltd. The director of this company resigned in November 2014, transferring his shares in the company on the same day to a company called Fascinating Horizon Overseas Ltd, based in the British Virgin Islands.

Both MyCoin's Hong Kong and Chinese customer service numbers are playing recorded messages, with the latter abruptly cutting off after a few seconds. The most recent listing for Rich Might Investment Ltd on the Hong Kong Companies Register shows the company submitted a 'Notice of Resignation of Company Secretary and Director' just yesterday.

The company's website gives little details of the structure or operations of MyCoin, instead saying it is "the world's first Bitcoin trading, e-commerce, mining machines, leisure games, Bitcoin mall" company. It also helpfully notes in its FAQ that "Bitcoin is also transliterated as 'bit of gold'".

While MyCoin was promising to more than double individual investments, the value of Bitcoin itself has plummeted on legitimate markets, declining from highs of more than $1,000 at the end of 2013, to just over $200 this month.