Bitcoin exchange Cryptsy may have gone full Mt Gox, refuses to pay out users

Bitcoin exchange Cryptsy may have gone full Mt Gox, refuses to pay out users

Bitcoin and altcoin exchange Cryptsy (Project Investors, Inc.) may be in a serious trouble, with one report over the weekend claiming that the exchange is refusing to allow users to cash out.

A report from The Merkle goes as far as claiming that the company has “gone full Mt Gox” (a reference to failed Japanese Bitcoin exchange Mt Gox) and that customers have had their funds frozen or were locked out of their account and are unable to withdraw coins.

It’s suggested that the downfall of Cryptsy may be related to the company being involved in a GAW Miners/ Paycoin ponzi scheme, in particular that Cryptsy held a Prime Controller for Paycoin and profited from the scam; it was reported earlier this month that Cryptsy was under Federal investigation for its involvement with Paycoin, and not from one agency but several: the Securities and Exchange Commission, the Internal Revenue Service and the Criminal Investigation Division of the Internal Revenue Service.

The report links to multiple users who have complained on popular Bitcoin forum Bitcointalk going back months who all have a similar story: they are unable to withdraw funds from Cryptsy, they have either been ignored by support or threatened with losing their accounts for constantly contacting support; in one case one user claims that Cryptsy changed the password on his account and wouldn’t let him access it.

This isn’t the first time Cryptsy has been in the spotlight for poor behavior with the company being sued in 2014 due to its links to the also now notorious Bitcoin Savings & Trust ponzi scheme.

Complaints, in that case, included that Cryptsy using deceptive and misleading tactics such as the promise of high profits based on seven percent weekly interest; not providing a safe and reliable platform to trade cryptocurrencies; and excessive fees and commissions, among others.

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No surprise

Cryptsy appears to be continuing to trade and take deposits at the time of writing but in the world of dodgy Bitcoin exchanges we’ve seen this before; the more important aspect is whether users are able to withdraw their funds, and answer currently would appear to be no.

If they have “gone Mt Gox” it’s of absolutely no surprise whatsoever, given the company’s previous involvement with some of the worst scammers and criminals to have ever operated in the Bitcoin space; that people would still trust the services of this company in October 2015 despite the nefarious company they keep is a sad reflection that either people don’t do some basic due diligence about the people they trade with, or just don’t care, and although there are legitimate victims here, the Latin phrase Caveat Emptor comes to mind.

Cryptsy is one of the ever shrinking pre-regulation, old school exchanges complete with Belize registration at a time where the Bitcoin and cryptocurrency space has moved to transparency and financial compliance through venture capital backed companies such as Coinbase and Gemini, taking Bitcoin to a broader, more publicly acceptable space.

The death of Cryptsy will be sad for those who lose money, but good for Bitcoin in the long term as the market can only progress once it is purged of those who are willing to steal and defraud users.

Image credit: stavos52093/Flickr/CC by 2.0
Duncan Riley

Duncan Riley

Duncan Riley is a senior writer at SiliconANGLE covering Startups, Bitcoin, and the Internet of Things.

Duncan is a co-founder of VC funded media company B5Media and founder of news site The Inquisitr, and was a senior writer at TechCrunch in its earlier days.

Tips? Press releases? Intersting startup? email: duncan@nichenet.com.au or contact Duncan on Twitter @duncanriley
Duncan Riley

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