On February 23rd, BitForex, a crypto exchange that claimed to be based in Hong Kong, disappeared from public view after withdrawing nearly $57 million from its hot wallet, and users, who were no longer able to log in and access their accounts.

The SFC has warned the public against a purported virtual asset trading platform operating under the name BitForex, which is suspected of virtual asset fraud.

BitForex, which claims to be based in Hong Kong, is not licensed by the SFC and has not applied for a license from the SFC to operate a virtual asset trading platform in Hong Kong.

Under the pretext of "wallet and website maintenance", the platform has made it increasingly difficult for victims to withdraw their assets from the platform over the past few days. Victims say that the BitForex website is now closed, making it impossible for them to check their accounts and withdraw their assets held on BitForex.

On February 23rd, Hong Kong-based crypto exchange BitForex abruptly suspended withdrawals after the platform delayed withdrawals citing wallet and website maintenance. At the same time, it was detected by ChainScout ZachXBT that around $56.5 million in cryptocurrency outflows from three BitForex hot wallets occurred before the exchange stopped processing transactions.

On February 26, the exchange's website was also officially closed. Users were unable to log into their accounts or load the website, and started to seek help on social media. However, BitForex's Platform X account has not been updated since February 21, and on its official Telegram channel, several users posted messages saying that their accounts could not be accessed and that their accounts did not show any assets.

The group has 23,413 members and currently more than 1,000 users are online waiting for a reply from the exchange. According to the grapevine, Hazel_BitForex, one of the administrators of the Bitforex wire channel, has deleted her personal account.

Although the official website is no longer accessible, the public can still find a lot of public information based on LinkedIn disclosures.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, Philippines and other countries.

According to information from the Hong Kong Companies Registry, the company was incorporated in 2018 and is registered in the Kwai Fong area in the northern New Territories of Hong Kong. In fact, its earlier years had been active in mainland China for a period of time under the Chinese name of moneyf.com, and then returned to overseas areas due to regulation. In the press release released by the company, also listed several related business locations. And from the business location, the final fact is only four words -- people gone empty.

Here, I would like to quote Callan Quinn, a Hong Kong-based reporter of DL news, who reported after visiting the registered and operating sites on the spot, that unlike crypto-companies that are densely registered in the city center or piled up in the Science Park and the Cyberport, the enterprise is instead situated in a large row of industrial zones near Kwai Fong Housing Estate, a residential area that is the terminus of the Tsuen Wan Line of the Mass Transit Railway (MTR), which is located about 40 minutes away from the city center.

BitForex Registered Locations, Photo Credit: Callan Quinn

According to the staff on the premises of the registered office, BitForex is just one of the thousands of companies that have already been served by the company, which is listed on the company's website, and which provides a virtual address for mainland Chinese companies aiming to set up an office in Hong Kong.The address of the company's secretary is listed in another place around the corner - the D/3 office building on the second floor of the industrial complex. - BitForex also lists the company's secret address in another place around the corner - the office building above the D/3 apartments on the second floor of the industrial complex, which is, unsurprisingly, also empty.

The last location in question is in the relatively busy Mongkok, which is difficult to access due to the absence of residents, but the letters and parcels strewn around the entrance of the office building correspond to the names of different companies, which makes it possible to assume that this address is also one of the virtual address services, a fact that is confirmed by Google Maps, which shows that BitForex isn't the only one that uses this address.

The addresses are all fake and the hundreds of staff that were claimed to be working for the company have long since disappeared, making it clear that this is a premeditated scam. The suspension of withdrawals came a month after the CEO of the platform, Jason Luo, left his job, which led users to believe that this was the beginning of a money run, because according to the files, Jason is the only shareholder and director of the company, and now lives in Shenzhen.

In fact, regardless of the fraudulent tactics, this is not the first time that the platform has run into problems, as many financial regulators have issued warnings against it. As early as October 20, the Securities Commission (SC), the Malaysian financial regulator, put BitForex on its unauthorized warning list.

In April 2023, Japan's Financial Services Agency (FSA) also accused BitForex of violating the country's fund-settlement algorithm, and the UK's Financial Services Authority disclosed that the BitForex exchange had been conducting business in the country without being registered.

However, this does not seem to have affected the platform's operations, as in September '23, after exiting the aforementioned region, BitForex claimed to be one of the world's leading cryptocurrency exchanges by market capitalization, with a daily trading volume of around $2.6 billion. According to CoinGecko, the exchange's trading volume dropped from $2.5 billion to $1 billion between February 22nd and 24th.

There are no data organizations tracking the platform, but it is interesting to note that BitForex was exposed by Chainalysis as far back as 19 years ago for falsifying trading data, stating that the real liquidity of the platform was only 1/800th of its reported volume, which is a staggeringly high rate of falsification.

BitForex Trading Volume Declines Rapidly, Source: CoinGecko

In terms of impact, this platform incident is far less far-reaching than JPEX, and it is difficult to track how the follow-up is being handled, but whether the new founder can be found and whether the stolen money can be recovered is still doubtful at this point in time, and the worst possible outcome may just be one more unsolved case, as well as the investors who are once again being given a lesson in the gory reality.

Source:

1. Hong Kong Securities and Futures Commission

2.https://www.blocktempo.com/bitforex-exchange-runs-away/

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