The Risks and Opportunities of the Crypto Assets Market: Insights from the BitForex Incident

Recently, the prices of mainstream Crypto Assets such as Bitcoin and Ethereum have surged significantly, sparking market expectations for a "spring of Crypto Assets" and a "super bull market." However, in an environment where opportunities and risks coexist, criminals have also started to target Crypto Assets investors. On February 23, 2024, a crypto exchange claiming to be headquartered in Hong Kong, BitForex, suddenly withdrew $57 million in Crypto Assets and disappeared, becoming the first "runaway" incident in the Hong Kong Crypto Assets community in 2024.

BitForex's Scam Tactics

BitForex is actually a rebranding of the previous "Coin Husband Network" exchange. This exchange has long used methods such as multi-account trading, cross-platform trading, and capital circulation to falsely inflate its liquidity. Although its real trading volume is only one-eighth of the publicly available data, BitForex is still able to attract retail investors by listing multiple small coins and using wash trading to create market liquidity due to the lack of effective regulation.

Two days before the exit scam, BitForex's trading data showed an abnormal cliff-like drop. Ultimately, on February 23, the exchange withdrew approximately $56.5 million in crypto assets from its online wallet, including $54 million in TRB, $1 million in ETH, and $250,000 in USDC, before shutting down the website and deleting community support accounts.

How to Avoid Pitfalls

1. Stay away from small exchanges: Investors should be cautious of small-scale, unregulated exchanges and avoid being tempted by short-term high returns while overlooking potential risks.

2. Use Third-Party Data Tools: Utilize tools like Dune Analytics, Chainalysis, etc. to analyze the real trading volume and abnormal activities of exchanges. These tools can help investors identify suspicious behavior on the platform.

3. Pay attention to personnel changes in exchanges: Significant personnel changes may indicate a change in the platform's management strategy or potential liquidation plans. For example, in the BitForex case, its CEO suddenly resigned one month before fleeing.

Rights Protection Channels for Mainland Residents in Hong Kong

Regarding the BitForex case, the Hong Kong Securities and Futures Commission has issued a notice confirming that BitForex does not hold a legal operating license. Mainland residents who suffer losses may consider seeking redress through the Hong Kong judicial system:

1. Report or accuse to the Hong Kong Police or the Joint Financial Intelligence Unit (JFIU).

2. If large sums of money are involved, a lawyer can be entrusted to apply to the Hong Kong court for an emergency freezing order.

3. A civil lawsuit against BitForex may include causes of action such as fraud, unjust enrichment, legal constructive trust, or implied trust.

4. Apply to the court for a disclosure order through a lawyer to obtain relevant account information and transaction records.

Conclusion

The Crypto Assets market is full of opportunities, but the risks should not be overlooked. Investors should remain vigilant, especially when trading on offshore Crypto Assets platforms. Fraud cases that occur abroad may lead to property losses that are difficult to recover, so it is essential to think twice when making investment decisions. Remember, when you're eyeing the platform's high interest, the platform may already be eyeing your principal.