Investors in the MyCoin Ponzi scheme are unlikely to get much of their money back, based on the latest developments in the case.
The company disappeared with possibly as much as HK$3 billion ($390 million) of investor funds. Whatever remained of them has reportedly been transferred by one of the company’s directors to an account in the British Virgin Islands.
Unlike in the Bernie Madoff case, authorities in a Ponzi scheme involving bitcoins may return empty handed. The laws of the blockchain do not grant any more power to police than to criminals.
Ironically though, the MyCoin operation likely never held on to a single bitcoin, according to Hong Kong Bitcoin Association head Leo Weese. If all funds remained in fiat form, there may be something left for authorities to grab onto.
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Today, at least 30 investors filed reports with police, with more likely on the way. The company had previously claimed 3,000 clientele, a figure that has yet to be verified.
A local lawmaker, Leung Yiu-chung, has been contacted by MyCoin clients looking for recourse. He was dismayed by the Hong Kong Monetary Authority’s (HKMA) response that bitcoin is not currency and therefore does not fall under its oversight. He commented:
“I told the [HKMA] that bitcoin is more than just an investment product. In fact bitcoins can be used for shopping, which resembles [one of the functions] of currency so I am of the view that the HKMA can do more about this matter.”
In a bid to protect investors, he has actually called upon the authority to prohibit the sale of bitcoins.
It has been suggested that police will have a tough time investigating, or may refuse to investigate altogether, due to the scant paper trail in the operation. Clients generally weren’t given proof of purchase documentation, although anecdotal proof may exist in the form of cashed cheques and computer records.