HONG KONG
Hong Kong lawmakers are urging the government to ban virtual currency bitcoin after more than 20 people filed complaints with police over a scam that may have duped investors out of HK$3 billion ($387 million).
The South China Morning Post reported Wednesday that clients of bitcoin trading platform MyCoin had claimed that the company was less of a Bitcoin exchange and more like a pyramid-style Ponzi scheme.
MyCoin promised a return of HK$1 million over a 4-month period for a HK$400,000 investment, which would produce 90 bitcoins on maturity, and claimed it had 3,000 customers investing an average of HK$1 million each.
The Post reported Monday that the exchange has since closed its doors, potentially leaving up to 3,000 investors out of pocket.
Lawmaker Leung Yiu-chung said more clients were expected to file complaints against the alleged pyramid scheme this week, according to the report. Dozens of other investors had requested Leung's help, it added.
At least five such clients who contacted another lawmaker, James To, also filed reports to police Wednesday afternoon.
Leung said that he had tried to alert Hong Kong Monetary Authority as to the scam, but they had responded that bitcoin was not a currency and thus did not fall under its oversight.
“I told the [HKMA] that bitcoin is more than just an investment product,” he said, according to the report.
“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.”
Leung said the authority should prevent the sale of bitcoins in Hong Kong as countries such as Thailand already did.
Leonhard Weese, president of the Bitcoin Association of Hong Kong - a community organization that aims to educate the public about Bitcoin and related technologies - said the government had been clear from the start that bitcoin is a “very risky” investment.
“An outright scam is you lose everything, whatever happens,” he said, according to the report, adding that "Clients seem not to be the young, savvy bitcoin crowd, but older, less savvy investors."
Weese said the company lasted as long as it did because of the nature of the pyramid scheme’s life cycle where new investors were recruited by existing ones.
Bitcoin exchanges are no stranger to controversy. Last February, Mt. Gox - once the world’s largest exchange in the virtual currency - shut its doors, leaving investors approximately $500 million out of pocket.
Bitcoin was the worst-performing currency in the world last year, according to Bloomberg, and United States regulators are moving to license and oversee operators.
The value of Bitcoin at 13.00 GMT Wednesday was $221.49 per BTC, far below last year's price of over $1,000.
