OFF INTO THE WILD WET YONDER How does this...
Another Bitcoin Operation Bites the Dust
Digital currency Bitcoin has received yet another black eye after another (possibly fraudulent?) operation fails and leaves investors hung out to dry.
Hong Kong-based Mycoin closed down its Kowloon offices several weeks back, and in doing so leaves approximately 3,000 investors deeply concerned about possibly losing a collective HK$3 billion (US$387 million).
If this were to happen, it would amount to roughly 10% of Bitcoin’s market capitalization.
Reports claim that the duped investors were most likely caught in a Ponzi scheme, as the investors were promised unreasonable returns on their investments. Investors have said that they were initially attracted by promises of a HK$1 million return in four months for buying a HK$400,000 Bitcoin “contract” that would produce 90 bitcoins on maturity.
None of the approximately 3,000 investors ever received any written agreement or share certificate for their investment. And in December, the company’s liquidity rules were abruptly changed to prevent clients from trying to withdraw unless they recruited more muppets (sorry, I mean other customers).
Adding insult to injury, incentives like luxury cars were offered to any investors who brought in friends and family.
Unfortunately for Bitcoin enthusiasts, this is just another example of how raw and untamed this new asset class happens to be. It is also a warning for anyone considering throwing money at cryptocurrencies or the companies involved.
The most infamous Bitcoin controversy has been Japan’s Mt. Gox‘s closure and bankruptcy. The Tokyo-based exchange was once the most popular Bitcoin exchange in the world, until it left investors scrambling to find out why (and how) their approximately US$500 million disappeared. Even to this day it remains a mystery. Although, new reports out of Japan are calling it an “inside job,” and poking holes in the company’s theory that the losses were due to a cyber attack.
The only possible positive takeaway from all this is that now maybe people will scrutinize Bitcoin companies a little more than they have in the past. Moreover, regulators are bound to become more involved. Whether this ends up being a good thing or a tragedy for the “decentralized” market remains to be seen.