Hong Kong police may not want to pursue cases against MyCoin, an alleged bitcoin pyramid scheme accused of ripping off clients

A bitcoin company that shut down suddenly in Hong Kong may have bilked investors out of up to HK$3 billion ($387 million). Approximately 30 investors reportedly approached lawmaker Leung Yiu-Chung about the closure of MyCoin and said they intend to file police reports on Wednesday.

Bitcoin Pyramid Scheme Robs Investors Of $387 Million

Identity of the alleged bitcoin crooks unknown

According to a report from Samuel Chan of the South China Morning Post, MyCoin was set up as a sort of pyramid scheme but disguised somewhat as a bitcoin trading platform. Up to 3,000 investors in Hong Kong may have lost hundreds of millions of U.S. dollars in the scheme.

One person who spoke to the South China Morning Post reportedly said, “No one seems to know who is behind this.”

Ms. Lau said she lost HK$1.3 million in the scheme, saying that she had invested in four bitcoin contracts, but her money vanished. She and other victims said people who were on “higher tiers” of the pyramid told them that if they could find more new clients, they could get their money back.

How the bitcoin pyramid scheme worked

The only proof the victims had of their investments was a trading account on MyCoin’s platform. The company did not give them anything in writing verifying their investments.

The victims said the Ponzi scheme operators promised them that they would see a return of HK$1 million on their investments within four months if they bought a bitcoin contract worth HK$400,000. When that contract matured, it supposedly would produce 90 bitcoins. The victims were also promised that they could earn more profits and prizes like a Mercedes-Benz if they found new clients for MyCoin.

Ms. Lau said clerks with law firms, real estate agents and insurance agents talked victims into buying the bitcoin contract. She also said she never gave her approval but that a law firm clerk opened an account in her name after family members sent in a check.

MyCoin changes the rules

Ms. Chan, another victim of the bitcoin Ponzi scheme, said she was able to recover HK$1.2 million on the HK$3 million she invested on seven contracts. She said her real estate agent promised that she would see more than HK$2 million in returns after a year. Some victims reportedly lost up to HK$50 million, and some even apparently mortgaged their properties to buy MyCoin’s bitcoin contracts.

MyCoin held events in several locations at luxury hotels. At one of those events, investment guru Jim Rogers was a guest speaker. In December, the company reportedly changed the rules for investors, no longer allowing them to cash in on their investments unless they could sign up more clients.

In addition, MyCoin apparently didn’t pay back the full price of what bitcoins were trading at. The platform valued it at HK$20, compared to the international price of about HK$1,770 this week. The value of a bitcoin jumped suddenly in late January on renewed confidence in the digital currency. The surge came just weeks after bitcoin prices plunged, falling 40% by the middle of January.

Bitcoin scheme shuts the doors

Early last month, the company closed its office in Hong Kong, posting a sign that it would be closed for renovations starting Jan. 3. The business remains closed, and lawmakers are concerned that police will be unwilling to handle cases involving the scheme because MyCoin never provided any written records.