Investors lose $387M to suspected bitcoin pyramid scheme

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A bitcoin exchange based in Hong Kong, which stopped trading unexpectedly has allegedly closed with more than US$387M of investors money unaccounted for.

According to the South China Morning Post, 3,000 clients invested in MyCoin after each being promised a return of almost US$129,000 on an investment of US$52,000, as well as being offered Mercedes Benz cars and other lucrative prizes as incentives for clients to recruit other investors.

However, there is now widespread speculation that MyCoin was nothing more than a bitcoin pyramid scheme.

Speaking to the South China Morning Post, Ms Lau, an investor in MyCoin who is reported to have lost HK$1.3M said that she had been told by people on “higher tiers” that she would get her money back if she recruited more clients.

Suspicions were first raised when MyCoin reportedly changed its trading rules preventing people from exchanging all of their bitcoins unless they recruited new people to invest in the exchange.

Worried investors then approached Hong Kong lawmaker Leung Yiu-Chung to voice their concerns and reports that they had not been given any written proof of their investment.

In a further development to the story, the SCMP is reporting that the sole director of the company which controls MyCoin resigned just before the introduction of the rule change mentioned above and in doing so, transferred all of his shares to company based in the British Virgin Islands.

The problems related to MyCoin will put further pressure on the authorities in Hong Kong to provide greater protection to bitcoin investors, an industry which at present is largely unregulated.

Around the globe, the recent history of bitcoin is littered with incidents of hacking and accusations of scams and failed investments in the digital currency.

Earlier this year, US based Coinbase announced the launch of the first bitcoin exchange in the United States.

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