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After the JPEX and HOUNAX fraud cases, Hong Kong has been very cautious in regulating virtual asset trading platforms, covering both information disclosure and advertising to ensure investors' interests, seemingly mindful of the proverb "once bitten, twice shy." However, those within the industry know that prevention is better than cure. Without public awareness improvement, cases of exchanges disappearing abound in the crypto circle, where phishing links, pyramid schemes among acquaintances, and account theft are rampant.
Just recently, another trading platform successfully absconded with funds in Hong Kong, staging a "desertion". This time, the operation was even more audacious, with actions speaking louder than words—they withdrew funds and vanished. On February 23, BitForex, a cryptocurrency exchange headquartered in Hong Kong, disappeared from public view after extracting nearly $57 million from its hot wallet, leaving users unable to log in and access their accounts.
This time, it seems the regulatory authorities were once again a step behind.
BitForex's exit strategy unfolded abruptly, leaving users stranded. On February 23, the Hong Kong-based exchange suddenly halted withdrawals, previously citing wallet and website maintenance as reasons for delayed withdrawals. Concurrently, blockchain sleuth ZachXBT detected approximately $56.5 million worth of cryptocurrencies flowing out of three BitForex hot wallets before the exchange ceased processing transactions.
By February 26, the exchange's website was officially shut down. Users couldn't log into their accounts or access the webpage, prompting them to seek help on social media. However, BitForex's X platform accounts had not been updated since February 21. Users reported being unable to deposit funds into their accounts, and dashboards displayed zero assets. With over 23,413 members, the Telegram group saw over 1,000 users waiting for the exchange's response. Rumors circulated that one of the administrators of Bitforex's Telegram channel, Hazel_BitForex, had deleted their personal account.
Although the platform's official website was inaccessible, public information could still be found on LinkedIn. BitForex claimed to have 6 million registered users and 51-200 employees, with teams in Germany, Estonia, Singapore, Malaysia, the Philippines, and other countries. According to information from the Hong Kong Companies Registry, the company was registered in 2018 in the Kwai Fong area of Northern New Territories, Hong Kong. Despite claims of various business locations in their press releases, the reality boiled down to one phrase—deserted.
Callan Quinn, a journalist for DL News based in Hong Kong, visited the registered and business locations, finding the company situated in the Dai Lin Pai Industrial Estate near Kwai Fong Estate, a residential area approximately 40 minutes away from the city center via the Tsuen Wan Line. Staff at the registration site primarily provided virtual addresses for Mainland Chinese companies seeking to establish offices in Hong Kong. Despite listing multiple business addresses, only emptiness greeted visitors.
Notably, the sudden withdrawal of funds occurred a month after the resignation of BitForex's CEO, Jason Luo. This led users to speculate that it marked the beginning of an exit scam, as documents indicated Jason was the company's sole shareholder and director, residing in Shenzhen.
This wasn't BitForex's first brush with trouble. Financial regulatory bodies in multiple countries had previously issued warnings against the exchange. In October 2020, the Securities Commission Malaysia included BitForex on its unauthorized warning list. In April 2023, the Japanese Financial Services Agency (FSA) accused BitForex of violating the country's Fund Settlement Act, and the UK Financial Conduct Authority disclosed that BitForex had been operating in the country without registration.
Despite exiting these regions, BitForex declared itself one of the world's leading cryptocurrency exchanges by market capitalization in September 2023, with a daily trading volume of approximately $2.6 billion. According to CoinGecko data, the exchange's trading volume dropped from $2.5 billion to $1 billion between February 22 and 24. Currently, there is no data tracking the platform, but it's worth noting that as early as 2019, Chainalysis had exposed BitForex for fabricating trading data, indicating that the platform's actual liquidity was only 1/800 of its reported volume.
Overseas communities were heavily impacted by this disappearance, with many launching Telegram groups to voice their grievances and track the exchange. The OMI token was frequently mentioned in these discussions.
According to the official website, OMI is the native token of ECOMI, a trading platform based on blockchain NFTs and digital collectibles. The token is listed on only four exchanges: OKX, BitForex, Gate, and AscendEx, with BitForex being the primary trading hub. The exchange held 7% of OMI's total supply. Therefore, the exchange's disappearance significantly affected OMI holders, leading to vigorous pursuit on X platform. However, despite this, the token's price remained unaffected at $0.001083, up 29.20% in the past seven days, although it had fallen from its peak of $0.008, indicating a substantial decline.
Following the incident, ECOMI's official account on X platform promptly responded, stating they had begun attempting to contact local authorities and actively engage with exchanges, but no updates were available. Some holders speculated the organization's involvement with the exchange, as it had placed a significant portion of its market capitalization and ecosystem on BitForex. Others claimed authorities were intervening in an investigation, as OMI-related projects closed their Telegram groups and underwent personnel changes after the incident. However, there is currently no direct evidence linking the organization to the exchange's disappearance, nor did the Securities and Futures Commission mention the related projects.
Coincidentally, Atom Asset (AAX), a Hong Kong exchange that had closed in 2022, also saw recent activity. After 426 days of silence, the AAX exchange wallet became active, transferring $74 million in large sums to other addresses in an attempt to evade identification and monitoring by AML tools. AAX was once one of Hong Kong's largest crypto exchanges. Although its former CEO, Thor Chan, and board member, Leung Ho-ming, were arrested for fraud in 2022, the founder's identity remains unknown. They reportedly hold the private keys to wallets containing HK$230 million (approximately $29.41 million) in user funds and access to the exchange. They are currently fugitives. Given the coincidental nature of the events, some speculated a connection between the founders of the two exchanges, but it remains speculative, lacking substantial evidence.
These events have once again brought cryptocurrency and regulatory issues to the forefront. From a financial regulatory standpoint, Hong Kong is already at a global leading level. However, regarding cryptocurrency regulation, the stringent licensing requirements and limitations on investable currencies have been criticized for hindering innovation. As a securities regulatory body, the Securities and Futures Commission faces challenges intervening in investigations before fraud occurs, as it lacks preemptive authority and can only issue warnings or cooperate with law enforcement after receiving complaints. Hong Kong, renowned globally as a financial hub, welcomes all businesses due to its excellent and relaxed business environment, with numerous offshore entities registered there. Querying each one would be akin to finding a needle in a haystack. On the other hand, Hong Kong residents' awareness of the crypto field appears inadequate. Despite numerous past incidents involving exchanges with questionable histories, having claimed to have 6 million clients, whether true or not, |
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Post time 17-3-2024 20:47:51