Another Bitcoin Exchange Fraud

Ellie K writes Bitcoin exchange MyCoin has vanished — leaving $387 million in investor funds unaccounted for. MyCoin is a Hong Kong-based virtual currency trading exchange. Bitcoin exchanges are no stranger to controversy. Mt. Gox closed in February 2014, filing for bankruptcy and leaving investors approximately $500 million out of pocket. Others were 'cyberattacked' including Flexcoin, Poloniex and Bitcurex.

Comments

They're all frauds

[AuMatar]

Does anyone still think that sending money over an unregulated channel for a dubious commodity is a good idea? There's a good reason banks are one of the most regulated industries on the planet.

Re:They're all frauds

[GerryGilmore]

I would actually challenge the use of the term "dubious commodity". How, pray tell, can the result of some math-hashing scheme be even remotely considered any kind of "commodity" (i.e. something that has some intrisic value)? Totally bizarre that anyone in their halfway-right mind would put something (real American dollars) that does have intrisic value - being "valid tender for all debts public and private" - into something that does not? A fool and his money, brothers and sisters!

Re:They're all frauds

[Anonymous Coward]

The USD only has value because people BELIEVE it has value. If everyone decided that the USD isn't trustworthy, it'd lose it's value almost instantly.

Same for Bitcoin. As long as people believe it has a value, it will.

Re:They're all frauds

[Bite The Pillow]

It was promised as an anonymous, unbreakable, encryption-based currency. And for a while, it was exactly that.

I'm old enough to remember Flooz commercials. Turn money into e-Money, and it's transferable and spendable in bits.

Let's take PayPal as an example. Lots of people accept and spend PayPal money, without ever cashing out as dollars. I know you can argue otherwise, but at its most basic, it is the same thing.

Unless you consider that this particular exchange was particularly suspicious, given signals from previous exchanges which were reputable and still failed. This paragraph is subjective.

Put a middleman in between my BTC and someone else's? Good idea. Put a reputable middleman there? Better idea. Replace middleman with PayPal? Let's go back a bit.

Remember when people could not get money out of PayPal? When accounts could be frozen and your only recourse was to whine like a bitch on the precursors to Consumerist and blogs in general?

If not, you're not old enough. It didn't work well at first for a minority, a large minority, but it is stable and owned by a big responsible entity now.

In summary, the same mindset that brought success to PayPal also brought success to these charlatans. Charlatans were assisted by the intrusions into privacy.

Should they? No. Does anyone now? Fewer. But there's a sucker born any minute. And privacy intrusion contributes more to the ignorant's readiness to risk than any blog post or business plan possibly could.

Re:They're all frauds

[DigiShaman]

Does anyone still think that sending money over an unregulated channel for a dubious commodity is a good idea?

Agreed. Bad idea.

There's a good reason banks are one of the most regulated industries on the planet.

Yeah, "regulated" in favor of the state; not the consumer. Just so that we're perfectly clear on this! That said, yes, I still favor a bank of sovereign currency over some BS virtual money.

Re:They're all frauds

[stoploss]

So you are saying guarantee of US laws and belief of bitcoin fans are the same thing?

You posed the question incorrectly.

What we're saying is that US laws mandating the value of the USD are only worth as much as people believe. There were laws mandating the value of the Mark in the Weimar Republic. There are laws mandating the value of the Zimbabwean Dollar. Obviously, those laws weren't/aren't sufficient to make people trust the currency and they collapsed.

Now, asking whether people *should* find the BTC to be as trustworthy as the USD is an appropriate question. The answer to that is obviously "no".

What we take issue with is the perspective that there is some divine providence conferred on national currencies that make them trustworthy, when clearly there is no such intrinsic property like that.

Re:They're all frauds

[gl4ss]

well the thing is that you don't need to keep your bitcoin _in_ the exchange... you only need to transfer it for the transfer.

if you're banking your bitcoin with the exchange then you're a dolt, even if they pay interest rate on it. if they pay a high interest rate then they're a scam.

and the process of sending money to the exchanges _is_ regulated like any financial transactions, so you're quite a bit off on that. it's you transferring bitcoin to another bitcoin owner that's the unregulated channel and then you're sending bitcoin..

Re:They're all frauds

[Oligonicella]

I don't, however, recall PayPal printing their own money as do the various bit coins. Other than a new concept having difficulty being implemented at first, there's not much of a comparison. PayPal was a go-between, the bit coins are attempting to mint money.

Re:They're all frauds

[AuMatar]

No, but if you own bitcoins you sure as hell are. But tell you what, I'll give you a discount rate on buying all the Flooz you want.

Re:They're all frauds

[Anonymous Coward]

Bitcoin - teaching libertarians that banking regulations are a good thing!

Re:They're all frauds

[gl4ss]

wtf man?

paypal is exactly printing their own paypal money by assigning money into paypal accounts. that's how they got people started and hoped that everyone wouldn't cash out at once.

paypal: can create as much as paypal as it wants - probably doesn't want to create more than it can pay out though.

paypal isn't only a go between, since you can let your funds sit in a paypal account. it's a bank but bullshited itself out of being a bank so they can grab whatever accounts they want when they feel like it.

bitcoin exchange: cannot create bitcoins out of thin air as much as they want.

however here's a top tip: never let your bitcoins sit in an exchange and never let your dollars sit in paypal.

Re:They're all frauds

[Optali]

Well, we believe what we see, and what we see is a whole bunch of industries churning out stuff.
I assume that that is a valid reason for believing in the US currency, don't you agree?

Re:They're all frauds

[msobkow]

It was never anonymous.

Re:They're all frauds

[NotDrWho]

The USD only has value because people BELIEVE it has value. If everyone decided that the USD isn't trustworthy, it'd lose it's value almost instantly.

Bitcoin doesn't have the largest military/intelligence complex in the world willing to bomb the holy fuck out of anyone who challenges its value.

Re:They're all frauds

[HornWumpus]

Never let your dollars sit in account associated with a pay pall account.

Move it out of the bastards reach the second it hits your account.

Re:They're all frauds

[thePicket]

No. The USD only has value because you have to pay your taxes with it and/or the government makes an explicit promise ("legal tender") that it will accept taxes paid with it. "Fiat" doesn't equal "virtual".

Re:They're all frauds

[thePicket]

Inflation has nothing to do with it. Regardless of inflation, the mark and the Zimbabwean dollar were still earned and traded -- because you still needed them to pay taxes. People's "belief" in a currency doesn't matter much in this respect: as long as you have to pay taxes in US dollars, you will still earn/buy dollars, and the currency will still have value. If the government loses its "faith" in the currency, now that's a different matter -- if seashells become accepted as a legal tender, you might see the dollar crash. It's as simple as that. As long as you have a tax-collecting state, the tender used for taxing will keep value.

Re:They're all frauds

[stoploss]

As long as you have a tax-collecting state, the tender used for taxing will keep value.

Don't be autistic. Yes, technically the value of these hyperinflating currencies is infinitesimally above zero. That does not count as "keeping value" when practically speaking it takes wheelbarrows full of currency notes to buy a loaf of bread.

So, no, you're wrong. History has repeatedly shown that simply having a government insist on taxation in the form of a currency they issue is an insufficient backstop for value in the face of loss of confidence in the populace.

People aren't stupid: they exit the currency in favor of other, more stable stores of value (other currencies, land, tampons, whatever), get paid in kind, or simply resort to barter. They convert into the worthless government currency later to pay taxes. They don't ride the sinking ship.

Re:They're all frauds

[thePicket]

Again: inflation is completely beside the point -- it has little to do with people losing "faith" in a currency. Loose monetary policy, the main cause of inflation, is not decided by people's "belief" in a currency, but by central banks/governments. You can lose your "faith" all you want to, but you'll still need to drive that lorry of hyper-inflated cash to the IRS office -- that is, you'll need to earn it/buy it. It doesn't matter in the slightest that it will be worth half of its current value tomorrow.

Bitcoin exchange != bank

[Anonymous Coward]

Yet more proof (as if you needed it) that storing your financial assets with unregulated "financial institutions" is a bad idea. Until Bitcoin exchanges are insured and regulated they will continue to be hacked and people will continue to lose bitcoins, this just damages bitcoin's reputation. It's a fantastic idea that is getting a bad wrap because of the wild west situation of exchanges.

Re:Bitcoin exchange != bank

[garyisabusyguy]

Once that bitcoin exchanges are regulated they will lose the ability to move cash around without oversight, which seems to be its primary appeal

Re:Bitcoin exchange != bank

[NotDrWho]

It's also the primary reason that exchanges are so easily able to scam people.

Dupe?

[mattventura]

I could have sworn there was a story about this a couple days ago. Get your shit together Dice.

Past Tense

[Qzukk]

I think you mean "MyCoin was a Hong Kong-based virtual currency trading exchange."

Also I do without slashdot for a whole day and what do I get? I get a dupe.

Welcome back, slashdot.

Re:Past Tense

[garyisabusyguy]

I rather enjoyed kongbucks and simoleans (actually the fictional stories that they were featured in), the real life embodiment in bitcoins... not so much

Re:Past Tense

[f3rret]

I rather enjoyed kongbucks and simoleans (actually the fictional stories that they were featured in), the real life embodiment in bitcoins... not so much

Kongbucks were actual money, the official currency of Mr. Lee's Greater Hong Kong.

That was not really an exchange

[JcMorin]

This "exchange" promise great return, wasn't listed in the huge directory of exchanges http://exchangewar.info/. This "exchange" didn't have any API for automation and arbitration. Lets just call this exchange a ponzi scheme. There is those get rich quick scheme everywhere... also in the bitcoin universe.

Re:That was not really an exchange

[gweihir]

And there are always idiots that cannot understand that things to good to be true usually are. Hence Ponzi schemes happen all the time. Noting really to do with BitCoin.

In The Criminals' Defense

[Greyfox]

The investors just keep falling for it! It's like shooting fish in a barrel. Also, apparently real world investors are no smarter than Eve online investors when it comes to bitcoin or isk. So here's a little hint, fellas, if someone's offering to hold your bitcoins (or isk) for you, it's a scam.

Re:In The Criminals' Defense

[AK Marc]

So https://mybitcoinsaver.com/ is a scam?

Re:In The Criminals' Defense

[michelcolman]

Well, at first sight it looks like it's not as big a scam as the others, but they're not doing charity work either. They simply take a small amount of money from every transaction, just for the convenience of automatically buying bitcoins every month. You're better off simply buying the bitcoins yourself, but then you'll have to actually do that every month.

The bitcoins go to a wallet under your control, they only have the public address, so they don't hold your bitcoin and can't suddenly take it away. The worst they could do is stop operating and keep all the incoming money while no longer sending any bitcoins, until people figure it out and it makes the news. So basically every user risks one monthly payment. Once the bitcoins reach your wallet, they are safe.

Re:In The Criminals' Defense

[delt0r]

Hay that is not fair. At least in Eve i will get to Double my isk. Double it! All i have to do is follow the instructions in his bio....

Re:In The Criminals' Defense

[Greyfox]

This is true. I usually give that guy 1 isk, and he does usually double it.

Re:My exchange is awesome.

[Anonymous Coward]

Bank Clerk: How can I help you, young man?

Stan Marsh: I got a hundred-dollar in bitcoin from my grandma and my dad said I need to put it in the bank so it can grow over the years.

Bank Clerk: Well that's fantastic. A really smart decision, young man. We can put that bitcoin in a money market mutual fund, then we'll re-invest the earnings into foreign currency accounts with compounding interest aaaand it's gone.

[Blank stares and silence as it goes from the Bank Clerk, to Stan, to the Bank Clerk, to Stan]

Stan Marsh: Uh... what?

Bank Clerk: It's gone, it's all gone.

Stan Marsh: What's all gone?

Bank Clerk: The money in your account. It didn't do too well, it's gone.

Stan Marsh: What do you mean? I-I have a hundred dollars!

Bank Clerk: Not any more, you don't.

[Gestures]

Bank Clerk: Poof!

Stan Marsh: Well what can I do to get back my...

Bank Clerk: [Interrupts] I'm sorry, sir, but this line is for bank members only.

Stan Marsh: I just opened an account!

Bank Clerk: Do you have any money invested with this bank?

Stan Marsh: No, you just lost it all!

Bank Clerk: Then please stand aside for people who actually have money with us. Next please!

Re:Shocking!

[Oligonicella]

I disagree, it's not above photocopying, Those machines produce tangible results.

Dupe. Dupe. Dupe.

[msauve]

Dupe.

timothy strikes again.

Rubbish journalism

[Sabbetus]

Just wanted to note that no one in the industry had even heard about this exchange before. It's not a real Bitcoin exchange. It was some sort of pure ponzi scheme that didn't actually even provide any sort of Bitcoin exchange, simply claimed that they do. So no, this was NOT another Mt. Gox. Mt. Gox was an actual Bitcoin exchange and also the largest exchange in from 2010 to 2012. MyCoin wasn't even an actual exchange. Get your facts straight, please!

This is NOT a Bitcoin Ponzi scheme

[Canth7]

It's just a regular Ponzi scheme with Bitcoin marketing. All of the investments came from wealthy investors who put up an average of 1M HKD looking for 2-3X return in only a few short months. Sure, the operators of the Ponzi scheme / "exchange" told them that they were going to get bitcoin in return but very few BTC actually flowed to investors. This is not really a Bitcoin story and the calls by HK regulators for banning Bitcoin is both unwarranted and won't stop the problem - there will always be suckers looking for a get rich quick scheme to draw them in, no matter what the medium of exchange may be.

Replace $387m with $8.1m. Oops.

[Canth7]

Instead of the ridiculous $387m in losses, it looks like closer to $8.1m in losses. http://www.coindesk.com/mycoin... As always, reporters are more than happy to run any title that gets hits, regardless of how likely the situation meshes with the facts.