Industry News

Bitcoin exchange vanishes

Bitcoin exchange vanishesAccording to local media reports, Bitcoin exchange MyCoin has disappeared in a puff of virtual digital smoke, taking with it possibly as much as US $387 million in funds belonging to as many as 3000 local investors.

According to the South China Morning Post, lawmaker Leung Yiu-chung is considering filing reports to the police on behalf of 30 concerned MyCoin clients, claiming that the company was operating a pyramid-style Ponzi scheme.

Certainly, it appears that MyCoin has a few months of troubles with its offices in Kowloon closed down some weeks ago for “renovations”, the resignation of its sole director, and the company changing its trading rules to forbid investors from cashing in their bitcoins at the end of last year, unless they managed to recruit more clients.

“No one seems to know who is behind this. Everyone says they too are victims… but we were told by those at higher tiers (of the scheme) that we can get our money back if we find more new clients.”

Some individual investors could find themselves facing loses of as much as US $6.45 million.

Of course, MyCoin is not the first Bitcoin exchange to find itself in hot water.

A year ago, Mt.Gox closed its doors after it was discovered that some 744,408 Bitcoins had been stolen, worth (at the time) some $480 million. Mt.Gox subsequently suffered a denial-of-service attack, and its CEO Mark Karpeles subsequently had his online accounts hacked, and some 716 MB of the exchange’s history of transactions was leaked onto the net.

More recently, Japanese police have reportedly speculated that the Mt.Gox Bitcoin theft was an inside job.

Who would *ever* have imagined that a virtual digital cryptocurrency – currently spiralling downwards in value – would be fraught with such risks?

It’s perhaps no wonder that Hong Kong Monetary Authority is warning the public about the potential dangers:

“We would like to remind members of the public to stay vigilant and guard against unscrupulous practices when participating in any investment plan, regardless of whether the products are bitcoin … or any type of financial or non-financial assets.”

About the author

Graham CLULEY

Graham Cluley is an award-winning security blogger, researcher and public speaker. He has been working in the computer security industry since the early 1990s, having been employed by companies such as Sophos, McAfee and Dr Solomon's. He has given talks about computer security for some of the world's largest companies, worked with law enforcement agencies on investigations into hacking groups, and regularly appears on TV and radio explaining computer security threats.

Graham Cluley was inducted into the InfoSecurity Europe Hall of Fame in 2011, and was given an honorary mention in the "10 Greatest Britons in IT History" for his contribution as a leading authority in internet security.

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