A Hong Kong Bitcoin exchange that promised sky-high returns by purportedly engaging in bitcoin trading has reportedly closed its doors, leading to rampant speculation that the company may have been operating a massive Ponzi and/or pyramid scheme. Bitcoin exchange MyCoin, which had earlier claimed it had over 3,000 clients who invested an average of nearly $13,000, was no longer accepting new users Monday morning. Additionally, Business Insider reports that the company's offices have been closed the last month for "renovation." Last week, over 30 alleged victims complained to a local member of Hong Kong's legislative council, and those victims are scheduled to make a statement to Hong Kong police on Wednesday.
MyCoin promised investors short-term returns exceeding 100% on an initial $52,000 investment, often hosting local events at luxury hotels. Customers believed they were investing in "mining" contracts, which refers to the practice of utilizing powerful computers to create new Bitcoins. Bitcoin "miners" receive Bitcoins for their work, and MyCoin promised investors that they could share in these returns through their investment. By rolling over their investment contracts, which typically spanned four months, investors could purportedly receive a return of over 300% on an annual basis. The company also attempted to incentivize the recruitment of new investors by offering prizes to top recruiters of cash or even a Mercedes-Benz.
Several recent events appear to be red flags that the company's operations were facing stress. Investors were not provided with any written records documenting their investment; rather, they were only able to view their trading account on MyCoin's website. In December 2014, the company modified its withdrawal rules by preventing customers from fully cashing in their accounts unless they were able to recruit more investors. The company's website also quotes the price of one Bitcoin at $1.36; the actual market value is currently approximately $218.28 per Bitcoin. Tech in Asia quotes the founder of another Bitcoin exchange in reporting that MyCoin had no license and was not "habilitated" to take deposits from investors.