Bitcoin Exchange Platform MyCoin Closes up with $387M from Investors

The unexpected closure of a Hong Kong-based bitcoin trading company leaves 3,000 investors with losses of $387M USD.



The company which made off with $387M  of investors’ funds is called It is a local bitcoin exchange which had allegedly been running an illegal pyramid scheme and unexpectedly closed last month. About 3,000 local investors signed up for the promise of a HK$1 million (US$129,000) return on HK$400,000 (US$52,000) bitcoin mining contracts.

It may resemble  Mt. Gox scenario where thieves targeted traders’ assets on the exchange, but actually it’s not.  In this case it’s more about investors’ lack of due diligence.

“Mycoin was offering its customers to invest in mining contracts, promising them 300 percent year-on-year profits. It is really a basic case of Ponzi scheme, exactly like what Madoff had done for years in the US with more classical investments,” says Aurélien Menant, founder of Hong Kong bitcoin exchange Gatecoin. “Investors were supposed to buy shares in mining rigs, and therefore get a proportional share of the returns of the mining activity.”

South China Morning Post reports that in December, the company changed its trading rules, forbidding investors to cash in all their bitcoins unless they manage to find more clients.

“No one seems to know who is behind this,” said Ms Lau. She invested HK$1.3 million($168K USD)  in four bitcoin contracts. “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.”

Only a trading account on the company’s trading platform was provided to all the customers of But there weren’t any written documents or receipts. It’s worth mentioning that last year, MyCoin organized expensive events at luxury hotels, including a roadshow in Macau featuring Rogers.

SCMP says that MyCoin did not pay according to the full bitcoin price, now valuing it at only HK$20 per unit compared to the international bitcoin price of around HK$1,770 (US$228) today.

“I think it is a new example of the importance of the counterparty risk, whenever you invest or entrust your money to someone else, whether it is bitcoin related or not,” Aurélien Menant told Tech in Asia. “MyCoin especially had no license, was not habilitated to receive deposits from investors, and just used bitcoins as a buzzword to attract potential targets.”

Mr. Menant continued: “Those people were blinded by the huge return promised, and did not take the time to conduct a proper due diligence, investigating who they were dealing with and what were the possible rationales of a such profitability, while those are the basics of any investment.”

The broader points of the scheme look very similar to GBL, a bitcoin exchange also based in Hong Kong that went dark in November 2013 with about US$4.1 billion of investors’ money.

In response to the scam, financial expert and professor at the Chinese University of Hong Kong called for bitcoin to be banned in the city, according to RTHK.

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