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12 Nov, 2013 17:06

Banshee bitcoins: $5 million worth of bitcoin vanish in China

Banshee bitcoins: $5 million worth of bitcoin vanish in China

A Chinese bitcoin trading platform suddenly shut down and up to $5 million worth of bitcoin disappeared with it, a reminder of the great risk associated with the digital currency.

Users were unable to log into the Chinese bitcoin platform Global Bond Limited (GBL) on October 26, and as much as $5 million (30 million yuan) has disappeared with it. 

The platform’s users had a “winning” streak of high yields and almost never “lost”, which made it something of an addictive investment.

Launched in May 2013, GBL claimed it was headquartered in Hong Kong, but users began to get suspicious when they traced the site’s server to Beijing.

GBL allegedly never received a license to sell and buy bitcoins and then vanished with clients digital investments, leaving no trace.

Because the currency isn’t regulated by any authority, it is difficult to get local police involved in the investigation.

The theft is one of the largest in the currency’s short four-year history.

Bitcoin’s extraordinary rise has garnered attention from investors from Cyprus to China, but the explosion of the crypto-currency has also ushered in fraud, theft, and scams.

An Australian bitcoin bank with over $1 million in digital currency was heisted, leaving users with nothing. 4,100 bitcoins values at $1.3 million were stolen.

The highly volatile virtual investment keeps rising, hitting new record highs. At the time of publication, the currency was trading at $391.53 on Japan’s Mt. Gox, one of the world’s largest bitcoin exchanges.

Since its inception in 2008 by a man using the alias ‘Satoshi Nakmoto’, Bitcoin has now gone mainstream; it can be used to buy coffee, pay for online dating services, and can even be retrieved from an ATM. According to Bitcoincharts, which follows the anonymous currency, there are nearly 12 million bitcoins in circulation.

Other scammers advertise themselves as bitcoin financiers, offering investment services, but then run off with customers' money. Many American trading bursars are run on the same sort of shady legality, which has led the US government to get involved and investigate.

Bitcoin and the law

Bitcoin's popularity among criminals and its vulnerability to fraud have made it the target of the US government.

A US judge has ruled Bitcoin is a real currency, and now it will face a Senate panel which will evaluate the legitimacy of digital currencies, as they are highly popular on illicit websites, like the Silk Road.

The Senate Homeland Security & Governmental Affairs Committee will hold a hearing entitled “Beyond Silk Road: Potential Risks, Threats and Promises of Virtual Currencies” on Monday, November 18.

Patrick Murck, a legal counsel for the Bitcoin Foundation, will testify before the Senate Committee.

“Our committee staff has been interviewing individuals inside and outside of government regarding the threats and risks related to virtual currency – and also the promise it holds in some areas,” a letter written to head of Homeland Security, Janet Napolitano, said.