First published: 12th February 2015
Forty-three clients of the Hong Kong based company MyCoin filed police reports on 11th February, claiming that deception was involved in a Ponzi scheme packaged as bitcoin trading. The Hong Kong Monetary Authority has restated its position that Bitcoin is not a legal tender but a virtual “commodity” and "it does not qualify as a means of payment or electronic money". Legislative Council Member Leung Yiu-chung said that he was upset by the Authority's response called on the authority to stop the sale of bitcoins in Hong Kong.
The company's website, https://www.mycoin.hk/, continues to operate from an Amazon webserver in the USA. The website was probably not designed by a native English speaker, under the heading "BTC Trading Start Here", it says, "We will on every selection button, every word of copywriting, every page design of contemplate, is to make user in the most simple, natural and quick way to complete operation."
The allegation is that MyCoin pretended to be a bitcoin trading platform, and took clients' money but bought no bitcoins. Many MyCoin clients made out cheques to Rich Might Investment Ltd as payment to MyCoin and the same company registered the mycoin.hk domain in January 2014. The sole director of Rich Might Investment Ltd, William Dennis Atwood, resigned on 10th November 2014 and transferred all his shares to a British Virgin Islands-based company the same day. Clients say that they have been unable to cash in their bitcoins since December. The company's Tsim Sha Tsui office shut in January.
The extent of the fraud is unknown. The company previously claimed to have 3,000 local investors, with an average investment of HK$1 million, but it is suspected that the company targeted Mainland Chinese investors, and there are stories of potential investors being flown to lavish parties in Thailand.
What effect will this have on other companies trading Bitcoins in Hong Kong? At least three companies have set up bitcoin ATMs since March 2014. A key difference is that the client actually receives the bitcoins from the ATM, so the risks of having a trading account in an untrustworthy company are eliminated.
Yui Kee Chief Consultant Allan Dyer commented, "The people who say bitcoin is not a currency or want to ban bitcoin are missing the point. The fraud was that bitcoin was not involved, people paid money and did not gain ownership of bitcoins as promised. The question is how to educate or regulate, so that people know how to identify legitimate bitcoin traders and bitcoins."
