Yet again million-dollar fraud in the bitcoin sector: another platform closed down causing a massive withdrawal of funds

28/04/2021

Another case of cryptocurrency fraud occurred in Turkey, where the Vebitcoin platform was shut down on allegations of fraud, and some of its employees were arrested. This is the second scandal, after the closure of Thodex, whose owner fled the country with about 2 billion dollars. These situations occur in the context of the imminent banning of cryptocurrencies throughout the country, in the face of an increase in demand due to the devaluation of the Turkish lira. 

Towards a world of cryptocurrencies. Image: Pixabay
Towards a world of cryptocurrencies. Image: Pixabay

Several Turkish platforms have been investigated and, after the arrest of some 70 employees of Thodex, the Turkish justice system arrested four employees of the Vebitcoin exchange, which experienced a massive withdrawal of its customers. Thodex announced last week that it was "unable" to continue operations with founder and CEO Faruk Fatih Ozer out of the country, the company reported in a written statement.

Bloomberg explained that it was not Turkey's largest cryptocurrency platform, "the closure of the platform has left the remaining assets of some 390,000 active users unrecoverable," according to Oguz Evren Kilic, who represents a significant number of Thodex users and filed a legal claim on their behalf.

Meanwhile, over the weekend, Vebitcoin announced the cessation of its operations in a brief statement posted on its website. "Due to recent developments in the cryptocurrency industry, our transactions have become much more intense than expected."

"We regret to state that this situation has led us to a very difficult process financially. We have decided to cease our activities in order to comply with all regulations and claims. We will inform you as soon as possible," they said. The withdrawals were reportedly in the face of Turkey's impending cryptocurrency ban.

This platform was one of the largest in Turkey, with a daily volume of nearly $60 million; of this amount, Bitcoin trading activity accounted for half. Meanwhile, the chief prosecutor of Muğla, Mehmet Nadir Yağcı, announced in a statement that four employees have been detained by law enforcement following allegations of fraud.

"Following the search and seizure operations carried out at the company's headquarters and some homes, 4 people, including company directors and employees, were arrested. The investigation carried out by the Cyber Crime Branch Directorate of Muğla Police Department is conducted in a multifaceted and meticulous manner."

These operations followed a surprise decision by Turkey's newly appointed central bank governor, Şahap Kavacıoğlu, effectively banning cryptocurrencies in the country as of next Friday.

The ban has become a contentious issue, as opposition leaders have expressed their support for cryptocurrencies.

The new restriction in Turkey will prohibit cryptocurrency holders from using their digital assets for payments, in addition to preventing payment providers from providing platforms for exchanging cryptocurrencies. As of May 1, any cryptocurrency payments will be illegal.

The bank stated that "any direct or indirect use of crypto assets in payment services and issuance of electronic money will be prohibited." Although banks are excluded from the regulation, meaning that users can still deposit Turkish lira into crypto exchanges via bank transfers from their bank accounts, payment providers will not be able to provide deposit or withdrawal services for cryptocurrency exchanges.

Payment providers and digital wallets are widely used in Turkey; the main platform, Binance, partnered with local payment provider Papara when they first entered the Turkish market to provide a lira input platform for several different cryptocurrencies. The Turkish government has always had tight control over the payments ecosystem and, in 2016, banned the leading global payments provider PayPal in the country.

By Mexicanist