$4.1 million missing after a Bitcoin trading site in China goes dark

Chinese Bitcoin exchange website GBL seems to have fallen off the face of the planet, along with RMB 25 million ($4.1 million) of its users’ money, according to CoinDesk.

The site went down on October 26, and the case is currently under investigation by the Hong Kong police.

The company first appeared in May of this year and managed to garner about 1,000 Chinese investors. GBL claimed to be based in Hong Kong, but the site’s servers were actually in Beijing.

A Chinese Bitcoin forum where the website was introduced received feedback questioning its credibility. Commenters noted the location irregularity, the lack of a professional company email address, and a general lack of relevant information.

The swindled investors probably should have been more careful in their due diligence. Clues hinting at the heist were clearly overlooked. GBL never received a license for financial services. In September, it started issuing stock to investors and began capping the amount of money users could cash out in October – moves that allowed GBL to get the most bang for everyone else’s buck.

We can only assume that the investors sought a false sense of security in numbers; if 999 other people are putting their money into it, then it’s probably safe. GBL promised fee waivers and promoted itself in the Chinese Bitcoin community to attract users. Most of them came from mainland China.

Bitcoin is a growing trend in China, at least among speculative investors. Bitcoin exchange site BTC China recently surpassed western rival Mt. Gox to become the world’s largest such service. Last month, Chinese search giant Baidu started accepting Bitcoins for its online security and firewall services. At press time, the virtual currency is valued at about $383 per bitcoin.

(See also: Getting Bitcoin into the hands of China’s average Zhou)

(Source: CoinDesk)

(Editing by Steven Millward)