Withdrawing money and running away, another Hong Kong crypto exchange staged an "empty city strategy"

As we all know, after the JPEX and HOUNAX fraud cases, Hong Kong has been very cautious in supervising virtual asset trading platforms, covering both information disclosure and advertising. I have the feeling of "Once bitten by a snake, I will be afraid of the rope for ten years", and I will do my best to protect the interests of investors.

But everyone in the industry also knows that blocking is worse than sparing, public awareness is not improved, divorced exchanges are everywhere, and phishing links, In the crypto industry where MLM schemes and account theft operations are ubiquitous, running away is not uncommon.

Just a few days ago, another trading platform successfully made money in Hong Kong and staged an "empty city strategy". This time the operation was even more outrageous, using fists but not talking. ——Just withdraw the money and run away. On February 23, BitForex, a crypto exchange based in Hong Kong, claimed to have completely disappeared from public view after withdrawing nearly $57 million from its hot wallet, and users could no longer log in to access their accounts.

This time the regulatory agencies seem to be a step too late.

BitForex ran away with a bucket, and everyone left the building empty< /strong>

On February 23, Hong Kong-based crypto exchange BitForex suddenly suspended withdrawals. Prior to that, the platform had been conducting wallet and website maintenance. Due to this reason, users’ withdrawals are delayed. At the same time, on-chain sleuth ZachXBT detected an outflow of approximately $56.5 million in cryptocurrency from three BitForex hot wallets before the exchange stopped processing transactions.

On February 26, the exchange’s website was also officially closed. Users, unable to log into their accounts or load web pages, began asking for help on social media. However, BitForex’s X platform account has no longer been updated since February 21, and on its official Telegram channel, multiple users posted messages saying that their accounts cannot be entered, and the dashboard does not display any assets. The group has 23,413 members, and more than 1,000 users are currently online waiting for a response from the exchange. According to rumors, one of the administrators of the Bitforex Telegram channel, Hazel_BitForex, has deleted his personal account.

BitForex official website cannot be opened, picture source: BitForex official website

Although the platform The official website is no longer accessible, but according to disclosures on LinkedIn, the public can still find a lot of public information. The BitForex platform is headquartered in Hong Kong and claims 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 incorporated in 2018 and was registered in the Kwai Fong area of ​​the New Territories in the north of Hong Kong. In fact, it was active in mainland China for a period of time under the Chinese name of Bifu.com in its early years, but later retreated to overseas areas due to regulation. In a press release issued by the company, several relevant business locations were also listed. Judging from the business location, the final fact is only four words - the building is empty.

I would like to quote the report of Callan Quinn, a reporter from DL News in Hong Kong, who visited the registration place and business place to explain. Different from the intensive registration of encryption companies in The city center may be clustered in the Science Park and Cyberport, but the company is located in the Dalian Pai Industrial Area near the residential area Kwai Fong Uk Estate, the terminus of the MTR Tsuen Wan Line, about 40 minutes away from the city center.

BitForex's registration location, picture source: Callan Quinn

According to the registration location Staff at the site said that their company mainly provides virtual addresses for use by mainland Chinese companies that aim to set up offices in Hong Kong. It has currently served thousands of companies, which are listed on the company's website, and BitForex is just one of them. BitForex also listed the address of the company secretary at another location around the corner - an office building above apartment D/3 on the second floor of the industrial complex. Not surprisingly, no one is there either.

The last relevant location is in the relatively prosperous Mong Kok. Although it is difficult to enter due to the absence of residents, the letters and packages scattered at the door of the office building correspond to different companies. Name, it can be speculated that this address is just one of the virtual address services. Google Maps confirms this fact, and the map shows that more than one company, BitForex, uses this address.

The addresses are all false and forged, and the hundreds of claimed staff members have long since disappeared, which undoubtedly does not indicate that this is a premeditated scam. . The suspension of withdrawals occurred one month after the resignation of platform CEO Jason Luo, which also made users think that this was the beginning of taking money and running away, because according to documents, Jason is the only shareholder and director of the company and now lives in Shenzhen.

In fact, regardless of the fraud methods, this is not the first time that the platform has had problems. Financial regulatory agencies in many places have warned it statement. As early as October 2020, the Malaysian financial regulator Securities Commission (SC) put BitForex on the unauthorized warning list. In April 2023, Japan's Financial Services Agency (FSA) also accused BitForex of violating the country's fund settlement law. The British Financial Services Authority also disclosed that BitForex exchange has been operating in the country without registration. .

But this does not seem to affect platform operations. After withdrawing from the above-mentioned regions, in September 23, BitForex called itself the world's leading cryptocurrency exchange by market capitalization. One, with a daily trading volume of approximately $2.6 billion. According to CoinGecko data, the exchange’s trading volume fell from $2.5 billion to $1 billion between February 22 and 24. There is currently no data agency record tracking the platform, but what is interesting is that as early as 2019, BitForex was exposed by Chainalysis for falsifying transaction data, pointing out that the platform’s real liquidity is only 1/800 of its reported transaction volume, which is false. The proportions are jaw-dropping.

BitForex trading volume dropped rapidly, source: CoinGecko

Overseas groups are covered, and there are countless clues. The China Securities Regulatory Commission finally issued a statement

Supervision As always, it's long overdue.

On March 4, after suspending withdrawals for more than a week, the Hong Kong Securities and Futures Commission (SFC) issued an announcement warning the public, Beware of a virtual asset trading platform that claims to operate under the name BitForex, which is suspected of virtual asset fraud. BitForex has not been licensed by the SFC, nor has it applied for a license from the SFC to operate a virtual asset trading platform in Hong Kong. The SFC has included it on the warning list of suspicious virtual asset trading platforms.

At the same time, the Hong Kong Securities and Futures Commission once again warned investors to beware of the risks of buying and selling virtual assets on unregulated virtual asset trading platforms. If the platform ceases operations, goes bankrupt, is hacked, or any assets are misappropriated, investors may lose all investments held on the platform.

Suspicious platforms listed by the Hong Kong Securities and Futures Commission, source: Hong Kong Securities and Futures Commission

But previously, the China Securities Regulatory Commission listed 14 suspicious virtual asset trading platforms on a warning list, and BitForex was not included in the list. On February 29, the China Securities Regulatory Commission announced the deadline for virtual asset trading platform applications. A total of 21 platforms submitted application materials. According to the regulations, exchanges that have not applied for a license before this date must close before May 31, 2024. In Hong Kong, operating a business without a license is a criminal offence. Perhaps this was the last straw that broke the BitForex exchange’s mind.

Compared with previous scams, more Hong Kong people were targeted. Looking at the speeches of Platform X, it seems that the disappearance of this trading platform has involved more overseas groups. Many overseas people have launched telegram groups for victims of fraud to denounce and follow up. Further tracking revealed that the OMI token was frequently mentioned.

Multiple overseas OMI holders on the X platform inquired about BitForex, source: X platform

According to the official website, OMI is the ecological currency of ECOMI, a trading platform based on blockchain NFT and digital collectibles. The token is only available on 4 trading platforms, namely OKX, BitForex, and Gate. and AscendEx, among which BitForex is the main gathering place. Data shows that this exchange holds 7% of the total supply of OMI. Therefore, the failure of this exchange has a significant impact on some OMI holders, and the prosecution for this on the X platform is also the most intense. However, judging from the currency price, the currency does not seem to have been affected. It is currently trading at 0.001083 US dollars, an increase of 29.20% in 7 days. However, if compared with the highest price of 0.008 US dollars, it has obviously fallen by more than one and a half points.

After the incident, ECOMI’s official account on the X platform immediately responded, saying that it had begun trying to contact the local government and actively contacted the exchange. But no updates are available. In this regard, some holders believe that the institution may be related to the exchange because it places most of its market value and ecosystem onBitForex At the same time, some people said that the authorities are involved in the investigation because OMI-related projects closed the Telegram group and made personnel adjustments and changes after the incident. However, judging from the current information, there seems to be no direct information naming the relationship between the institution and the exchange, and the China Securities Regulatory Commission has not mentioned related projects.

Coincidentally, Atom Asset (AAX), a Hong Kong exchange that has collapsed in 22 years, has also made recent moves. According to the tracking of the Beosin team, after 426 days of silence, the AAX exchange wallet began to move, transferring large amounts of US$74 million in batches to other addresses in an attempt to avoid the identification and monitoring of AML tools. AAX was once one of the largest crypto exchanges in Hong Kong. Although former CEO Thor Chan and board member Liang Haoming were arrested by Hong Kong police for fraud in 2022, its founder remains unidentified and is carrying HK$230 million worth ( ($29.41 million) of user funds and the private keys holding access to the exchange’s wallet are now at large. Due to the coincidence of the incident, some people have speculated that the founders of the two major exchanges may be related, but these are mostly speculations without substantial evidence.

Regulatory issues? Or the worst ending?

The occurrence of various incidents has once again brought encryption and the Securities Regulatory Commission to the forefront.

But from a factual point of view, Hong Kong is already a global leader in terms of financial supervision. As for encryption supervision, due to strict licenses The limitations of chemical licenses and investable currencies, "Asia Weekly" even issued an article stating that Hong Kong's overly conservative supervision hinders innovation and flexibility.

Secondly, as a securities regulatory agency, it is difficult for the China Securities Regulatory Commission to intervene in investigations before fraud occurs, and it does not have such authority. Only after receiving a complaint will we issue a warning in the form of a statement or cooperate with the police. As a world-famous financial capital, Hong Kong has an excellent and relaxed business environment that is open to all companies. Many offshore institutions have registered here. If you check them one by one, it is as difficult as finding a needle in a haystack. From another point of view, Hong Kong people’s understanding of the encryption field is obviously insufficient. An exchange with a lot of criminal records actually has 6 million customers. Regardless of whether the data is true or false, it is still unbelievable, but maybe it is. It is precisely because of the information gap that this fraud case covers many overseas groups.

Of course, this does not mean that the China Securities Regulatory Commission has no responsibility. A suspicious exchange has been in business for almost 6 years, during which many institutions have investigated it. Reports and statements from financial regulators in other regions, but the supervision itself has not responded. This undoubtedly reflects Hong Kong's excessive tolerance and regulatory neglect.

From the perspective of impact, this platform incident is far less far-reaching than JPEX. The follow-up process is difficult to track, but whether the new founder can search, Whether the stolen money can be recovered is still full of doubtsfrom the current point of view, and the worst result may just be another unsolved case and investors who have once again been taught a lesson by the bloody reality. them.

References:

Callan Quinn ：My search for a Hong Kong crypto exchange that disappeared with $57m led to an empty office in a strip mall;

Gaurav Roy: BitForex Disappears Without a Trace— Website Vanishes, Investors Left in Limbo