MyCoin clients file police reports over suspected bitcoin pyramid scheme
PUBLISHED : Wednesday, 11 February, 2015, 5:51pm
UPDATED : Wednesday, 11 February, 2015, 5:51pm
Samuel Chan and Danny Lee
Bitcoin has dropped in value from a November 2013 high of US$1,242. Photo: AFP
At least 20 out-of-pocket clients of Hong Kong-based bitcoin trading platform MyCoin filed reports to the police this afternoon about what they complain was a pyramid scheme packaged as trading in the digital currency.
More clients are expected to follow suit this week, said lawmaker Leung Yiu-chung, who has received requests for assistance from dozens of MyCoin investors. At least five such clients who contacted another lawmaker, James To Kun-sun, also filed reports to police this afternoon.
Lawmaker Leung said he was upset by the Monetary Authority’s response that bitcoin is not a currency and thus does not fall under its oversight.
“I told the [HKMA] that bitcoin is more than just an investment product,” he said, “In fact bitcoins can be used for shopping, which resembles [one of the functions] of currency so I am of the view that the HKMA can do more about this matter.”
Leung called on the authority to stop the sale of bitcoins in Hong Kong as some countries like Thailand did.
Asked if the fact that MyCoin clients were not given written proof of purchase would be a hurdle for police investigation or even reason for possible refusal to handle the cases, lawmaker To said investors had addressed cheques to the company which controls MyCoin, leaving a clear paper trail.
He said computer records kept at MyCoin could be used to match the clients’ transaction records to prove they did have dealings with the company if police decided to pursue the case.
Leonhard Weese, president of the Bitcoin Association of Hong Kong, said the government had been clear from the start that bitcoin is a “very risky” investment.
“An outright scam is you lose everything, whatever happens,” he said.
Bitcoin doesn’t come with guarantees of returns or promise … It is a technology that can be very valuable.”
He said investors had lost money in the digital currency either way after its collapse in value since November 2013 from a high of US$1,242 a bitcoin. This afternoon, one bitcoin was trading for US$221.
“MyCoin slipped under the radar of the bitcoin community because they had other investors in mind,” he added.
Weese said the company lasted as long as it did because of the nature of the pyramid scheme’s life cycle where new investors were recruited by existing backers.
