When a Chinese Bitcoin exchange called GBL was launched in May this year many people in China saw it as an opportunity to get rich.
They'd seen how others worldwide had profited handsomely from investing in the Bitcoin market and so over the next five months almost 1,000 people deposited around $4.1 million in Chinese Yuan attracted by inducements from GBL such as fee waivers. You can guess what happened ... yes, these investors are, to put it mildly, disappointed.
The rise of Bitcoin, the famous open source virtual currency, has been a fascinating story. Started just four years ago, the value of a Bitcoin (abbreviated as "BTC") recently hit a new high of 425USD, an impressive jump considering that its value at the beginning of 2013 was around 13USD. Even more impressively the market cap for the entire Bitcoin currency system of 11,986,700 BTC is, as of writing, just over 4.75 billion USD.
Unfortunately for the GBL investors the exchange turned out to be a con and on October 26 the people behind the scheme absconded with all of the funds in the form of Bitcoins which are, of course, untraceable.
There were more than a few clues that GBL was not on the up-and-up. A big red flag was the issue that the company's servers were located in Beijing even though the GBL web site claimed to be in Hong Kong. Then there was the problem that while the exchange had registered with the Hong Kong authorities a financial services license had never been issued. Finally there was the capping by the exchange in early October of the amount of money users could convert into other currencies and the issuing of shares in GBL in lieu.
While this virtual heist should have dampened overall Bitcoin market confidence it has hardly made a ripple and the price of BTC has remained strong. In the long term however this is yet another lure for regulators in every country to start looking at Bitcoin with an eye to reigning the currency in to bring it under some kind of governmental control and inevitably tax it into submission.