Sunday, October 19, 2014

Bitcoin Trader Goes Belly-Up

Bitcoin Trader, a service that billed itself as a means for users to earn passive Bitcoin income online has ceased operations.

On the 6th of October, users began reporting the inability to withdraw funds from the service.

The owner of the operation has put out the following letter:

Dear Clients

Regrettably I have to announce the failure and closure of Bitcoin Trader.

While preparing for the final audit results, a task we were working on for weeks now, our bitcoin wallet has been hacked and emptied, just after exchanging our fiat holdings within the exchanges to bitcoin and transferring our entire holdings to our wallet, in order to proof our solvency.

It is a known fact that I personally opposed any proof of solvency, but agreed to conduct it for the sake of a few dozen small and medium investors.

The hacker contacted me shortly after he took advantage of our holdings and demanded a ransom in order to transfer the coins back. I have agreed to a 25% ransom of the entire sum, but haven’t heard back from him for several days now.

My aim was to create something based on trust, just as bitcoin itself is based on distributed trust. Unfortunately I must admit today, I have failed. All left to do now is to declare bankruptcy with the Panamanian authorities and to hand over all relevant files and information for further investigation.

Sincerely, John Carley
NEWSBTC comments:
[W]hile the statement seemingly said everything it needed to, it raised so many questions about the validity of Carley’s statements.
Why would a hacker make such demands? Why weren’t financial audits published previously?
Many in the community are declaring Bitcoin Trader to be a HYIP (high-yield investment program), a type of Ponzi scheme....Disclosure: Bitcoin Trader has previously sponsored NEWSBTC, along with a number of other publications and bitcoin-related events. When I learned about the questionable activities of the company, I immediately pulled their banner ad.

1 comment:

  1. Sounds exactly like what the High Yield Investment Plan ponzi schemes of 2005-2007 (which were run via e-gold rather than bit coin)used to say everything they closed their doors. was probably the largest and most publicized, but there were hundreds out there. I don't think this story has much to do with bitcoin directly other than maybe the fact that the owner wanted to cash out his coins before he thought they may go to 0.