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Reuters/Benoit Tessier
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PONZICOIN

The Mycoin scandal in Hong Kong had nothing to do with actual bitcoins

By Heather Timmons

Last June, two dozen mainland Chinese investors traveled to Hong Kong for a special “bitcoin tour,” sponsored by Mycoin, the Hong Kong startup that just unexpectedly closed shop, taking an estimated $390 million with it. The tour traveled through Hong Kong by bus, stopping at Mycoin’s Kowloon headquarters, the city’s new “bitcoin ATMs” that have sprung up in the past year, and the handful of shops in the city that take bitcoin.

Seven months later, Mycoin’s office is empty, a director has reportedly transferred the company’s assets to a British Virgin Islands account before departing, and a growing number of people say that despite marketing itself as a hub for the digital currency, Mycoin actually had no bitcoin at all.

“MyCoin was never really a [bitcoin] exchange,” Leo Weese, the president of the Bitcoin Association of Hong Kong, which has about 50 members and draws hundreds to local “meet-ups,” told Quartz. “It wasn’t possible to trade bitcoins on it and the entire company likely never held any,” he said. In other words, it looks like it was all an elaborate hoax—probably a Ponzi scheme.

Whatever it was, hundreds of investors who thought they were buying bitcoins are out huge amounts of money, and no one in the bitcoin industry in Hong Kong or anywhere else in the world thought to tip off investors or local authorities that it might have been a scam. About twenty complaints from Hong Kong-based Mycoin customers were passed to local police today.

Where mainland Chinese investors can turn to complain is anyone’s guess—authorities there have been trying to drive local investors away from the cryptocurrency for months, and banned financial institutions from dealing with it last year. Chinese investors are barred from moving more than $50,000 a year out of the country, well below the average that Mycoin says its typical investor committed.

Besides the bus ride, which an investor described to Weese, Mycoin flew hundreds of current and potential investors to Pattaya, Thailand, last year, for a lavish poolside DJ party complete with scantily-clad dancing girls, guys in Mycoin polo shirts, and fireworks—and then filmed it and put it up on their website.

“I loooove bitcoin!” two female attendees coo to the camera at one point. But were they Mycoin investors or paid entertainers?