The recovery of the encryption asset market has triggered a new wave of fraud risks

Recently, the prices of mainstream cryptocurrencies such as Bitcoin and Ethereum have surged significantly, leading many investors to believe that the long-awaited "encryption asset spring" and "super bull market" have arrived. However, in a market environment where opportunities and risks coexist, some unscrupulous individuals have also begun to set their sights on encryption asset investors.

On February 23, 2024, a cryptocurrency exchange claiming to be headquartered in Hong Kong suddenly withdrew $57 million from its online cryptocurrency asset wallet, subsequently shutting down its website and disappearing, marking the first major exit scam incident in the Hong Kong cryptocurrency asset sector in 2024.

Details of the Exchange Runaway Incident

This exchange is actually a rebranded version of the previous "Bifu Network". As early as around 2019, the platform artificially inflated its liquidity data through frequent self-trading with multiple accounts, cross-platform trading, and capital circulation. In September 2023, the exchange even claimed to be "one of the leading cryptocurrency exchanges in global market capitalization, with a daily trading volume of approximately $2.6 billion."

However, according to a report from a well-known third-party encryption asset crime research platform, the real trading data of the exchange was only about one-eighth of its public data as early as 2019. Nevertheless, due to a lack of effective regulation, the platform was still able to attract retail investors through frequent listing of small tokens and wash trading.

Two days before the exit scam, the trading data of the exchange saw a sharp decline, with the trading data on February 22 being particularly obvious. On February 23, the exchange directly withdrew approximately $56.5 million from its online wallet, including $54 million in TRB, $1 million in ETH, and $250,000 in USDC, then closed the website and deleted the community customer service accounts.

Investor Precautions

1. Stay away from small exchanges: Avoid being tempted by short-term high returns and beware of the "quick and easy" speculation trap.

2. Make good use of third-party data tools: Reasonably utilize on-chain data monitoring and analysis tools such as Dune Analytics and Chainalysis, refer to virtual asset reports published by multiple platforms, and identify the true situation of exchanges.

3. Pay attention to personnel changes at exchanges: Significant personnel or shareholder changes at encryption asset platforms may indicate a change in the platform's operational strategy or a preparation to run away. For example, in this incident, the exchange's CEO suddenly resigned in January, claiming that "a new leadership team will be joining."

Cross-Border Rights Protection Suggestions

For mainland residents who encounter encryption asset fraud in Hong Kong, the following rights protection measures can be taken:

1. Report or accuse to the Hong Kong police or the Hong Kong government's Joint Financial Intelligence Unit (JFIU), and provide relevant account information to request the freezing of the related accounts.

2. If there are significant losses and the account has not been frozen, a lawyer can be authorized to apply for an emergency freezing order from the Hong Kong court.

3. Consider filing a civil lawsuit on grounds such as fraud, unjust enrichment, or constructive or resulting trust.

4. For evidence that is difficult to obtain on your own, you can apply to the court for a disclosure order through a lawyer to obtain relevant information and documents.

It is worth noting that the asset recovery and loss mitigation system in the Hong Kong region differs significantly from that in the Mainland. The judicial authorities in Hong Kong are primarily responsible for handling criminal cases themselves and do not directly handle the recovery of funds for victims. Therefore, victims need to pursue compensation for their losses through civil litigation and other means.

Finally, investors are reminded to exercise caution when dealing with offshore encryption trading platforms, and not to overlook potential risks for short-term gains. Especially in cases of fraud that occur in other countries or regions, it may be more difficult to recover losses through legal proceedings.