BitcoinBusiness & Finance

Another Bitcoin Fraud? Crypto Exchange Successfully Pulled a Houdini

Cryptocurrency exchanges have established themselves as an integral part of the crypto ecosystem. However, have you ever given it a thought what would happen if the place that you trust with your digital assets, vanished into thin air, along with your assets? Seems slightly far-fetched but not entirely impossible as a cryptocurrency exchange, Bitsane, did exactly that. The Ireland-based cryptocurrency exchange managed to pull a Houdini and disappeared without a trace, taking users bitcoin and other crypto assets worth millions with it.

Bitsane was launched back in November 2016 and claimed to offer some of the best features that would help the platform in creating a new industry standard for crypto exchanges everywhere. Reportedly, it was registered in Dublin as Bitsane LP with Aidas Rupsys as the platform’s CEO and Dmitry Prudnikov as its chief technology officer.

On its launch the crypto exchange emphasized on its dedication to security. Their press release explained that Bitsane has incorporated “state-of-the-art security”, which includes network protection, up-to-date infrastructure, network backup, advanced monitoring and cold storage.

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The platform was touted to be community centric keeping the global crypto community in mind. The exchange’s press release mentioned that customers are their first and foremost priority and should they need help at any point with the platform, quick professional support is always within reach on Bitsane. A representative of the platform said:

We will continue listening to the needs of our customers and ensure that their needs are met. We put our customers’ interests first and ensure that their funds are secured at all times

Ironically enough, three years later, customers are unable to reach them and it’s safe to assume that their funds are not secure in the least.

Bitsane’s Rise to Fame

Between late 2017 and 2018, a period which is known for the height of cryptocurrency craze, Bitsane managed to attract several casual investors because it allowed them to purchase and trade Ripple’s XRP, which at that time was not listed on the major exchanges like Coinbase.

READ ALSO: Crypto Fraud: Brothers Put Behind Bars for the 2016 Exchange Hack

The fraudulent exchange was given more hype, courtesy media coverage. CNBC published a story on how to buy XRP, which was being labeled as the hottest competitor of Bitcoin at that time. Since Bitsane had XRP listed, the article mentioned prospective traders and investor could purchase Bitcoin or Ethereum from the U.S.- based crypto exchange Coinbase, which they could later transfer to Bitsane and exchange it for XRP.

Events Leading up to the Disappearance

According to Forbes, account holders at Bitsane revealed that the exchange’s services started deteriorating in May, as they weren’t able to withdraw Bitcoin, XRP and other cryptocurrencies from the platform. Upon reaching out to the support team, they were told that withdrawals had been disabled temporarily in light of some technical reasons.

And just a month later, on June 17, the exchange’s website went offline without any explanation and Bitsane’s social media accounts on Twitter and Facebook were both deleted. The platform had become unreachable even via email, as emails to any of its account were rendered undeliverable.

Aftermath of the Disappearance

According to its website, when it was last operational on May 30, Bitsane boasted having 246,000 registered users which is now the number of victims that fell prey to the scam.Victims of the colossal con have come out on social media as they try to make sense of what has happened.

There is even a Facebook group dubbed ‘Bitsane.com Scam Victims’, where people claim to have lost up to $5,000. Some users are hopeful that they might get their funds back, as they have seen situations like this happen before, termed ‘exit scam’, although it’s mostly common in the case of initial coin offering (ICO). But an exit scam at the level of an entire functioning cryptocurrency exchange is practically unheard of.

Investigation Findings and Likely Suspects

Reports suggest that the enquiries with the Irish Central Bank reveal that Bitsane was never registered with them. Ireland’s national police service, Garda Síochána, is on this case. Chief Supt Pat Clavin shared that they have a team of specialists working on the case. He further added:

We have trained people, we have digital specialists who are able to take possession of the computer or the mobile device, able to move those cryptocurrencies so that we are in control of them.

However, the police doesn’t seem to have much to go on since all the employees of the Bitsane have gone off the radar. The LinkedIn accounts of the chief technology officer, Prudnikov, has been deleted and the CEO, Rupsys, is purportedly out of reach. There is just one name that has led to an actual person who was affiliated with Bitsane, Maksim Zmitrovich.

READ ALSO: Even Bitcoin Creator Has Less Bitcoins Than Hackers

Back in August 2017, Zmitrovich was hoping to own the intellectual property rights to the Bitsane’s code and ultimately using it for his own trading platform dubbed Azbit. However, Azbit never ended up using the code and their partnership never saw the light of day.

However, what does link Zmitrovich to the Bitsane scam is his company called Bitsane Limited, which happens to be separate from Bitsane exchange. But coincidentally, Zmitrovich’s Bitsane Limited filed for dissolution on May 16, around the same time the exchange started acting shady. Some of the victims have put the blame on him, making him a suspect.

Zmitrovich, on the other hand, has denied all such accusations. Even the platform, Azbit published an official post about the Bitsan scam on June 13, insisting upon its innocence. The post reads:

Dear friends, to begin with we want to repeat it again — Azbit has nothing to do with Bitsane. The second thing we have to say — Azbit is as deceived as Bitsane’s victims are.

As of now, the location of the funds and of Bitsane’s employee’s remains a mystery. The exchange’s nefarious disappearance stunt is bound to shake the confidence that people only recently had developed for the cryptocurrency industry. This will serve as a cautionary tale to potential investors and users alike, among other hacks and security breaches that have tainted the reputation of the crypto ecosystem as unsafe and unreliable.

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Abeer Anwaar

Abeer holds a Bachelors degree in Media studies and covers blockchain startups for BlockPublisher. An optimist, excels in the art of the written word and swears by the joy of all things sweet. Contact the editor at editor.startups@blockpublisher.com

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