BitForex withdraws money and runs away, another Hong Kong crypto trading platform is "empty"

2024-03-08 16:00

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Original title: "Withdraw money and run away, another Hong Kong crypto exchange staged an "empty city strategy""

Original source: Gyro Finance

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. Feeling like "once bitten by a snake, you will be afraid of the rope for ten years", we try our best to protect the interests of investors.

But everyone in the industry also knows that blocking is worse than sparing. If public awareness is not improved, the case will be dismissed. Exchanges are everywhere, and in the crypto community where phishing links, pyramid schemes by acquaintances, and account theft operations are everywhere, it is not uncommon for people to run away.

Just a few days ago, another trading platform successfully made money in Hong Kong and staged an "empty city strategy". This time His operation was even more outrageous, he used his fists but not his words - he just took the money and ran away. On February 23, Hong Kong-based crypto exchange BitForex disappeared from public view after claiming to have withdrawn nearly $57 million from its hot wallet, and users were no longer able to log in to access their accounts.

This time the regulator seems to be a step too late.

01BitForex ran away with a bucket, and the performers left the building empty

On February 23, Hong Kong-based crypto exchange BitForex suddenly suspended withdrawals. Previously, the platform was mainly engaged in wallet and website maintenance. As a result, users’ withdrawals are delayed. Around the same time, it was monitored by on-chain sleuth ZachXBT, who saw 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 shut down. 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 not been updated since February 21, and on its official Telegram channel, multiple users posted messages saying that their accounts could not be entered and the dashboard did not show any assets. The group has 23,413 members, and more than 1,000 users are currently online waiting to hear from the exchange. According to grapevine, one of the administrators of the Bitforex telegram channel, Hazel_BitForex, has deleted his personal account.

BitForex official website cannot be opened. Image source: BitForex official website

Although the official website of the platform is no longer accessible, according to disclosures on LinkedIn, the public can still find a lot of public information . Headquartered in Hong Kong, the BitForex platform 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.

Here we quote the report of Callan Quinn, a reporter from DL news in Hong Kong, who visited the place of registration and business. To explain, unlike crypto companies densely registered in the city center, or clustered in the Science Park and Cyberport, this company is located in Dalian, near the residential area of Kwai Fong Uk Estate, at the terminus of the MTR Tsuen Wan Line about 40 minutes from the city center. In the industrial zone.

BitForex’s registration location, Image source: Callan Quinn

According to the staff at the registration site, his company mainly provides virtual addresses for It is used by mainland Chinese companies that have set up offices in Hong Kong. It currently serves thousands of companies and is listed on the company's website. 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, which, unsurprisingly, is also unoccupied.

The last relevant location is in the relatively prosperous Mong Kok. Although it is difficult to enter due to the absence of residents, there is an entrance to the office building. The scattered letters and packages correspond to different company names. It can be speculated that this address is just one of the virtual address services. This fact is confirmed by Google Maps, which shows that more than one company, BitForex, uses this address.

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

In fact, regardless of the fraud methods, this is not the first time that the platform has had problems. Local financial regulatory agencies have issued warning statements. 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, and 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 said It is one of the world's leading cryptocurrency exchanges by market capitalization, with a daily trading volume of approximately US$2.6 billion. The exchange’s trading volume fell from $2.5 billion to $1 billion between February 22 and 24, according to CoinGecko data. 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

02 Covered by overseas groups, there are countless clues, and the China Securities Regulatory Commission finally issued a Statement

Regulation is, as always, belated.

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 claiming 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 buying and selling virtual assets on unregulated virtual asset trading platforms. Asset risk. If the platform ceases operations, goes bankrupt, is hacked, or any assets are misappropriated, investors may lose all investments held on the platform.

Listed by the Securities and Futures Commission of Hong Kong Suspicious platform, source: Hong Kong Securities and Futures Commission

But before, the Securities and Futures Commission listed 14 suspicious virtual assets Trading platform warning list, this list does not include BitForex. 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 final straw for the BitForex exchange.

Compared with previous scams, they are more targeted at Hong Kong people. Looking at the speeches of the X platform, this transaction The disappearance of the platform seems to have involved more overseas groups, and many overseas people have launched telegram groups for deceived people to denounce and track the situation. Further tracking revealed that the OMI token was frequently mentioned.

X Multiple overseas OMI holders on the 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, 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 cooperate with Local authorities were contacted and the exchange was actively contacted, but no updates were 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 ecology on BitForex. At the same time, some people say that the authorities are getting involved to investigate because of OMI-related projects. After the incident, the Telegram group was closed and personnel adjustments and changes were made. 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, also There has been some action recently. According to tracking by the Beosin team, after 426 days of silence, the AAX exchange wallet became active and transferred 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.

03 Supervision 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 perspective, Hong Kong is already a global leader in terms of financial supervision. As for encryption regulation, due to strict licensing requirements and limitations of investable currencies, Asia Weekly even issued an article stating that it believes that Hong Kong's overly conservative regulation hinders innovation and flexibility.

Secondly, as a securities regulatory agency, it is difficult for the China Securities Regulatory Commission to intervene before the fact of fraud occurs. It does not have such authority to investigate. It can only issue warnings in the form of statements or cooperate with police actions after receiving complaints. 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 perspective, 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 this period, many institutions reported on it and made statements from financial regulators in other regions, but the supervision itself showed no response. 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, and it is difficult to track the subsequent processing and follow-up. , but whether the new founder can be found and whether the stolen money can be recovered is still full of doubts at present.And the worst result may be just one more unsolved case and another bloody case. The reality taught investors a lesson.