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Previously Hacked Gatecoin Exchange Receives Liquidation Order Following Banking Problems

Hong Kong-based Bitcoin and Ethereum exchange Gatecoin has been granted a winding-up order on March 13.

Gatecoin, a crypto exchange that was hacked in May 2016, has announced on March 13 that it has received a winding up (compulsory liquidation) order from an unspecified court.

The company wrote that Gatecoin will have to cease operation with immediate effect, noting that the exchange will assist in the liquidation process in order to distribute assets to the creditors.

The Hong Kong-based exchange had suffered a major hack back in May 2016, with around $2 million in cryptocurrencies lost after the firm reported a security breach that gave hackers access to Gatecoin’s hot wallets.

According to the team’s statement at the time, hackers stole 250 Bitcoin (BTC) and 185,000 Ethereum (ETH), which represented 15 percent of Gatecoin’s total crypto assets. At press time, such an amount of BTC and ETH is worth around $25.5 million, according to data from CoinMarketCap.

In the recent announcement, Gatecoin wrote that the firm started working with a Payment Service Provider (PSP) following issues with its banking partners in September 2018. In the post, Gatecoin appeared to blame the PSP for the liquidation process, claiming that it failed to process most of the transfers in a timely manner, which “almost paralyzed our operation for many months and caused substantial loss.”

Gatecoin further elaborated:

“Even after we managed to mitigate our loss by replacing that PSP with more reliable alternatives to process our clients’ transfers in September 2018, the situation did not improve because that PSP retained a large part of our funds.”

The company explained it tried to recover the funds by initiating legal action against the PSP, but was advised that it was unlikely to recover the funds fully, which caused financial difficulties that made Gatecoin no longer able to support its operations.

As Cointelegraph has reported, Gatecoin was also struggling banking issues in 2017, with some banks reportedly shutting down the accounts of the exchange without detailed explanation.

Back in 2015, Gatecoin had launched segregated client bank accounts, enabling two accounts within the same bank under Gatecoin’s name: one account was for collecting fees and operation expenses, while the other was used for storing client deposits, as well as processing withdrawals.

Founded in 2013, Gatecoin reportedly became the first crypto trading platform to list the Ethereum token in August 2015.

Another recently hacked crypto exchange, Cryptopia, has since partly relaunched its website, also announcing that it will be using customers’ balances held from the date of the hack as a basis for further calculating rebates.

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Chinese IT Giant Tencent and University of Hong Kong Collaborate on Fintech

The Tencent Financial Academy signed a memorandum of cooperation with the University of Hong Kong to foster fintech research.

Tencent Financial Academy, a subsidiary of Chinese IT giant Tencent — signed a memorandum of cooperation with the University of Hong Kong on March 6 for joint research and development projects related to financial technology. Chinese media outlet QQ reported about the deal on March 7.

The collaboration reportedly involves joint research and development of fintech projects between the financial technology and blockchain lab of the department of computer science at the University of Hong Kong in cooperation with Tencent. According to the article, the University of Hong Kong will also launch a fintech course in its bachelor program in September this year.

For four years, Tencent’s subsidiary will also be offering internship opportunities to University of Hong Kong students and providing workshops, guest lectures and corporate visits. According to QQ, the Tencent Financial Academy was established in June 2018 to search for financial and technology talents needed in modern finance.

As Cointelegraph reported in October last year, the Chinese Financial Blockchain Shenzhen Consortium (FISCO), led by multinational telecommunication company Huawei and Tencent, announced its coinless blockchain FISCO BCOS.

More recently — in February — Ripple has announced the latest new partners in its global University Blockchain Research Initiative, which include universities in the United States, China, Singapore and Brazil.

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Flashy Hong Kong Crypto Millionaire Arrested For Mining Scheme

Young Crypto Entrepreneur Arrested In Hong Kong

Wong Ching-kit has been a mythical figure in the Asian crypto community for a while now. Some see the Hong Kong native as a successful, smart entrepreneur that is at the ripe age of 25. However, there are some, purported victims of his schemes, that don’t see Wong, also known as “Coin Young Master,” in that light.

According to a scathing report from the South China Morning Post (SCMP), Wong was arrested on Thursday for his affiliation with a cryptocurrency mining company, which purportedly played investors by selling faulty machines to the unknowing public. He, alongside a 20-year-old co-conspirator, was arrested by the local police, the Commercial Crime Bureau to be specific, for conspiracy to defraud.

When Wong was arrested, authorities also secured a copious amount of potentially incriminating documents, computers, and cash from a local office, along with the entrepreneur’s home in a quiet part of Hong Kong. Officials also froze $637,000 U.S. worth of Wong’s assets as part of its recent enforcement action.

Their arrest comes after a number of Hong Kong citizens took to public forums to proclaim they were duped, siphoning HK$3 million (~$400,000 U.S.) of their funds into a not so forthcoming operation, which garnered traction on social media in the middle of 2018. The situation was exacerbated, as an investor involved in this entire imbroglio filed a lawsuit against Wong in a bid to try and secure his HK$125,000 ($16,000) investment.

Interestingly, this may be just the tip of the iceberg when it comes to this scheme. Crystal Ho Yui-kuen, the chief inspector of the Hong Kong bureau, told the SCMP that while only a dozen or so victims have claimed they were swindled, there’s a high likelihood that there “might be more victims, or the offense took place over a longer period.”

So how did Wong get caught up in this mess, and what did the purported scam entail?

Per claims from victims, Wong enticed them to invest in highly profitable machines that mined Filecoin, a project that ICOed but has yet to launch. As Filecoin, one of the most popular token sales in crypto’s history, is evidently not even live for the public yet, it became clear that Wong’s product was likely a scam.

Not His First Run-In With The Fuzz

Funny enough, this isn’t his first run-in with the Hong Kong fuzz. In a previous SCMP report, it was explained that hooded man was spotted around Fuk Wa Street and Sham Shui Po, one of Hong Kong’s most underprivileged neighborhoods. The man, who was revealed to be serial cryptocurrency entrepreneur Wong Ching-kit, purportedly began to throw millions of HKD banknotes onto the crowd below. Although police reportedly advised the public not to pick up the cash, the allure of no strings attached money overcame the authorities’ cries, as members of the public scrambled to obtain the seemingly endless stream of fiat.

Following this fracas, Wong was arrested for “disorderly conduct in a public place,” not for his supposed involvement in mischievious crypto-related schemes.

Photo by bady qb on Unsplash

The post Flashy Hong Kong Crypto Millionaire Arrested For Mining Scheme appeared first on Ethereum World News.

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Hong Kong Entrepreneur Who ‘Made It Rain’ from High-Rise Arrested for Crypto Mining Fraud

A purported Bitcoin millionaire, allegedly involved in a publicity stunt throwing money from a high-rise in Hong Kong, is now accused of mining-related fraud.

A purported Bitcoin millionaire (BTC) who was previously involved in “making it rain cash” on the streets of Hong Kong, has reportedly been arrested for mining-related fraud, the South China Morning Post reports Thursday, Feb. 28.

A 25-year old businessman named Wong Ching-kit and his 20-year-old colleague have purportedly been arrested by Commercial Crime Bureau officers at their office in Hong Kong. They are reportedly being held in custody for conspiracy to defraud investors by selling them cryptocurrency mining machines. Details on how or why these miner-related sales were considered fraudulent were not forthcoming.

As Cointelegraph reported in early January, Wong was accused of misleading numerous investors into purchasing mining hardware for a crypto token dubbed “Filecoin,” allegedly promising his clients profits on their investments within three months.

However, according to the investors, the coin was not tradeable. As SMCP then reported, the Democratic Party, which was helping those affected by the alleged fraud, said it received more than 20 complaints since October 2018. The total amount of their losses was around HK$3 million ($383,000). Some investors were demanding a full refund on their funds.

Following numerous complaints, the police promised to start a probe into Wong’s activities, which included suspected money laundering. However, the entrepreneur himself denied the accusations, claiming that he was being treated as if he killed people instead of selling mining machines.

Wong was purportedly part of a publicity stunt in Hong Kong’s relatively poor district Sham Shui Po in December 2018. The entrepreneur appeared in a video posted on his firm Epoch’s Facebook page, asking whether anyone believed that money could fall from the sky. Stacks of bank notes reportedly amounting to HK$6,000 ($764) subsequently were thrown from a nearby rooftop.

Following an incident, Wong was arrested on suspicion of disorderly conduct in public. However, later he was released on bail.

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Big Four Auditor PwC Publishes Crypto Insolvency Guide, Cautions Directors

PwC has published guidance for financially distressed or insolvent businesses in the crypto sector.

Big Four audit and consultancy firm PwC Hong Kong has published guidance for financially distressed or insolvent businesses in the crypto sector. The document, released February 2019, tackles the complexities specific to the nascent industry, in particular in regard to asset valuation and multi-jurisdictional operations.

PwC notes that the two parameters used to determine a company’s financial viability — cash flow and balance sheet assessment — may be more difficult to ascertain in the case of crypto assets, whose volatility complicates a clear-cut valuation. The document continues:

“Further, the lack of clarity on the accounting treatment of cryptoassets and as of yet, no broad consensus on taxonomy in the crypto world or how to accurately value cryptoassets, means that ambiguity may arise when evaluating the solvency status of your crypto firm.”

Once a company’s financial standing is in jeopardy, the auditor notes, directors’ duties shift from serving the best interests of their shareholders to those of their creditors, which become paramount. The document outlines the possible loss of management control, civil penalties, and even criminal charges a director risks if they fail to adequately manage insolvency proceedings.

PwC cautions that where relationships between major creditors and directors have broken down, “a disgruntled creditor may take enforcement action to initiate formal insolvency proceedings […] and to appoint a liquidator.” An externally appointed liquidator has the statutory right to investigate the conduct of directors, opening the possibility of civil — and, more rarely, criminal — actions against them, and exposure to personal liability.

As opposed to this compulsory liquidation, in another scenario a director may retain the ability to initiate the liquidation voluntarily. Where a jurisdiction is relatively debtor-friendly, this may allow for a soft-touch liquidation, PwC states, whereby management preserves control while restructuring and creditor payments are settled.

PwC specifically addresses firms that operate in multiple jurisdictions, which the auditor contends is a common case for the crypto industry. For an insolvency case, the document clarifies that the principle of the Centre of Main Interest is used to establish which jurisdiction’s laws take precedence.

As reported, now-shuttered Canadian crypto exchange QuadrigaCX is currently the focus of legal proceedings and controversies following the death of its CEO in December 2018, which allegedly left the firm unable to access the majority of its crypto assets.

The founder’s widow and de facto co-director has this week asked the court to appoint a chief restructuring officer to take over proceedings, citing her lack of experience with an insolvent company and the unwanted public attention the case has drawn to her personally.

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2019 Will See Entry of More Institutional Players in Crypto, Says Asia Fintech PwC Leader

The fintech and crypto leader for Asia at PricewaterhouseCoopers (PwC) believes that many institutional players will enter the crypto space in 2019.

Henri Arslanian, the Asia fintech and crypto leader of PricewaterhouseCoopers (PwC) Hong Kong, has predicted that many institutional players will enter the crypto industry in 2019. Arslanian made this claim during an interview with Bloomberg published on Dec. 24.

When asked about his outlook on crypto for the next year, Arslanian said that he thinks “there’s a lot of exciting things that the crypto ecosystem is looking forward to in 2019.” Arslain explained that he expects the next year to be different from 2018 because of the increasing regulatory clarity.

Arslanian also declared that he expects “many more big banks” to enter the space, some by launching their own solutions, others by partnering with or investing in crypto companies. This involvement, he explains, will bring in “institutional level expertise” which — according to him — is much needed in the industry.

PwC is an international network of companies that provide consulting and auditing services. The company — which has its headquarters in London — was founded in 1849 and is one of the “big four” accounting companies. Their Hong Kong office has accepted Bitcoin (BTC) as payment for its advisory services since late 2017.

There have been already some announcements by major institutions, seemingly backing Arslanian’s claims. As Cointelegraph reported earlier this month, Nasdaq — the world’s second-largest stock exchange — has confirmed its plans to launch Bitcoin futures in the first half of 2019.

Also, the Intercontinental Exchange (ICE), operator of 23 exchanges including the New York Stock Exchange (NYSE), announced that they plan to launch their Bakkt digital asset platform on Jan. 24, 2019.

However, there have been recently reports this year that several Wall Street giants have postponed their plans to move into crypto amid the falling prices of cryptocurrencies.

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BitMEX and Hong-Kong Listed Wine Firm Plan Joint Foray Into New Japanese Crypto Exchange

Crypto exchange BitMEX and French wine retailer Madison Holdings Group are reportedly partnering to acquire a majority stake in BitOcean.

Crypto exchange BitMEX and a fine French wine retailer are reportedly partnering to acquire a majority stake of licensed — but as yet inactive — Japanese crypto exchange BitOcean. Cointelegraph Japan reported on the potential partnership on Dec. 21.

Madison Holdings Group, which is currently listed on the Growth Enterprise Market (GEM) of the Hong Kong Stock Exchange, reportedly plans to acquire a 62.7 percent stake of BitOcean for 1.68 billion yen ($15.12 million) — paid to existing third-party stakeholders — in addition to a further $15 million in extra fees. The deal, as yet incomplete, is reportedly to be made via a subsidiary, Madison Labs, according to Madison’s filing to GEM earlier this month.

BitOcean is a crypto exchange that is officially registered with the Japanese regulator, the Financial Services Agency (FSA), even as it has yet to go live with its trading services.

The BitOcean deal notably comes in parallel to plans for Madison Labs’ majority acquisition by the parent company of major crypto trading platform BitMEX. According to a report from Hong Kong English-language newspaper South China Morning Post (SCMP) on Dec. 26, HDR Cadenza Management — a subsidiary of BitMEX owner HDR Global Trading — is considering acquiring a 51 per cent stake of Madison Labs, at a cost of $17.14 million.

As CT Japan reports, if and when both deals are finalized, the move would make BitMEX a partner and indirect shareholder in Madison’s crypto trading entry. CT Japan writes that Madison’s joint foray into BitOcean with HDR will aim to harness BitMEX’s technology and accumulated know-how in regard to establishing an enterprise-grade crypto derivatives trading infrastructure.

BitMEX currently offers crypto futures and indefinite contracts, as well as leveraged trading — regulation of which is currently being debated within the country, as CT Japan further notes.

Raymond Ting Pang-wan, chairman at Madison, told SCMP that the firm had opted for an investment in BitOcean due to its licensed status and the country’s robust crypto regulatory framework. Ting further told SCMP that while Madison’s wine business is stable and profitable, it is hard to scale, noting:

“This is why we have to diversify into financial technology and the cryptocurrency business — to achieve a better return for our shareholders.”

He also added that as crypto and blockchain become “more popular,” entering the sector will allow the firm to “expand” its income source.

As previously reported, Japan has both a self-regulatory body, the Virtual Currency Exchange Association (JVCEA), and a thoroughgoing procedure for crypto exchange operators to acquire a license from the FSA. The organization has exercised intensified oversight of the sector since this January’s industry record-breaking $532 million hack of domestic trading platform Coincheck.

While a license has been mandatory for all crypto exchanges operating within Japan since the amendment of the country’s Payment Services Act back in April 2017, the FSA continued to ratchet up requirements for applicants throughout 2018; as many as 200 operators are reported to currently be awaiting a license.

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Hong Kong Stock Exchange Calls Alleged Bitmain IPO Hesitation ‘Rumors’

Recent reports claim that the Hong Kong stock exchange is “hesitant” to consider a Bitmain IPO due to current market conditions.

A Hong Kong Stock Exchange (HKEX) spokesperson has called Bitmain’s alleged hesitation around a purported initial public offering (IPO) “rumors,” in an email to Cointelegraph Dec. 17. When asked for verification and details on the crypto mining firm’s IPO status, the spokesperson responded that “HKEX does not comment on rumors.”

Blockchain and crypto media had previously reported that the exchange was “hesitant” to host its IPO because of market conditions surrounding the overall crypto mining business. Anonymous sources have reportedly claimed that “the exchange is very hesitant to actually approve these Bitcoin (BTC) mining companies because the industry is so volatile. There’s a real risk that they could just not exist anymore in a year or two.”

The slump in crypto markets that followed 2017’s record highs has been difficult to bear for many crypto mining firms. Some have reportedly begun selling off mining equipment that reached its “shutdown price” by the kilogram. Citing market conditions, Bitmain has closed its Israel-based development center and dismissed local employees.

The potential Bitmain IPO has been the subject of some controversy and confusion over the course of the past few months. Several companies that were purported to be investors in the firm’s pre-IPO have stated that they are not involved.

As Cointelegraph reported in September, Singapore-based firm Temasek was alleged to have committed $560 million dollars to Bitmain’s IPO. Temasek said in an official statement:

“We’ve seen commentary about an IPO involving a cryptocurrency company, Bitmain. Temasek is not an investor in Bitmain, and has never had discussions with, or an investment in Bitmain. News reports about our involvement in their IPO are false.”

In August, Henry Yu, a Hong Kong lawyer and legal expert, told Cointelegraph that a Bitmain investor deck in Chinese used vague and misleading wording when listing investors ahead of its rumored IPO. In the Bitmain pre-IPO investor deck acquired by Cointelegraph, DST Global is listed as an investor, with claims that the investment was “recently completed.”

DST Global confirmed to Cointelegraph that it “has never invested in Bitmain.” The largest Uber shareholder, SoftBank, has also denied its alleged involvement in the offering.

In November news broke that Bitmain is facing a $5 million class-action lawsuit for allegedly mining cryptocurrency for its own benefit on its customers’ devices. Gor Gevorkyan, the lead plaintiff, suggested that the lengthy “initialization” process of the ASICs sold by Bitmain has the hardware mining at full power at users’ expense.

Additional reporting by Adrian Zmudzinski

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Overstock Subsidiary tZERO to Develop Smart Contract Token for Rare Metals Sale

Overstock subsidiary tZERO will develop a commodity sales token for an upcoming sale of cobalt.

Private equity firm GSR Capital has contracted Overstock.com Inc.’s subsidiary tZERO Group Inc. to develop a smart contract token for a sale of cobalt, according to a press release published Dec. 17.

tZERO and Hong Kong-based GRS Capital’s partnership is focused on developing an ecosystem in Asia for tokenized commodity purchase contracts that would purportedly improve the supply chain process of rare metals. Additionally, the parties are looking to launch a security token platform in the region, following compliance with relevant regulatory requirements.

Per the release, the token will be used for a sale of cobalt, and is expected to launch in 2019. The “first-of-its-kind cobalt offering” will include recurring tranches of electric vehicle battery-grade cobalt, with up to $200 million of the material to be available for sale.

Patrick Byrne, the Overstock CEO and tZERO executive chairman, stated that “smart contract automation of these transactions will significantly reduce overall costs while effectively improving transparency in rare earth metals purchases.” However, in order to complete the project the companies are delaying a previously announced equity investment until the end of February, 2019.

In August, Overstock and tZERO signed term sheets with GRS Capital to invest up to $374.55 million in exchange for common equity in tZERO and common equity in Overstock.com. Apart from that, GSR Capital will reportedly purchase $30 million in tZERO Security Tokens from Overstock.

In a letter to GRS Capital stock holders released on Dec. 16, Overstock notes that GRS Capital has signed a retainer agreement with tZERO that guarantees the cobalt offering is not delayed by the extension of the GRS Capital investment.

In late November, Byrne announced plans to reportedly sell his e-commerce business to fully devote the firm to blockchain projects. As reported by WSJ, Overstock’s blockchain-focused subsidiary Medici Ventures is the cause of visible losses for the company amounting to $22 million in 2017 and $39 million in the first nine months of 2018.

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Cryptocurrency Regulations: Hong Kong Considers Stricter Laws for the Industry

The Hong Kong regulatory body is planning to tighten its regulatory grip on the cryptocurrency sector to combat money laundering and fraudulent activities.

Money Laundering Fears Prompt Stricter Cryptocurrency Regulations

The Hong Kong regulatory body, the Securities and Futures Commission (SFC) plans to introduce stricter regulatory policies for virtual currency exchanges and startups, according to a report by the Nikkei Asian Review.

Hong Kong which offers a relaxed atmosphere for virtual currency exchanges to thrive as against mainland China is considering stricter regulatory policies. This change comes as a result of concerns bordering on money laundering and fraudulent activities associated with initial coin offerings (ICO).

Some professionals in various fields commented on the new stance by Hong Kong’s regulatory body. Daisuke Yasaku from the Daiwa Institute of Research stated that the region’s proposed regulation on cryptocurrency is a good move. However, Yasaku warned that regulations came at a high price.

Yasaku also noted that the SFC’s new regulatory framework could subject virtual currency exchanges to stringent monitoring and inspections.

Timothy Loh, an attorney who owns a law firm in Hong Kong, also said:

The requirements of the SFC initiative may prove too burdensome for some operators. Some will decide not to join the new framework in order to maintain their current shares in the market.

The proposed SFC’s regulatory guidelines stipulate that investment funds which have more than ten percent assets in digital currency would need a license. Also, cryptocurrency companies would only deal with seasoned investors.

The new regulatory framework allows companies to issue ICO for tokens that have lasted at least one year.

Also, the SFC is set to introduce a voluntary scheme where cryptocurrency exchanges would test digital assets in a regulatory sandbox. This “testing” would determine if virtual currency exchanges would receive a license or not.

Increasing Cryptocurrency Regulations in Asia

The Asian continent has strived to put in place regulatory frameworks guiding cryptocurrency compared to its Western counterpart. The continent is home to the biggest hacks in virtual currency history. These massive attacks on local cryptocurrency exchanges have led most Asian countries to introduce regulatory rules that ensure security and protect investors.

Following the hacks on Japanese cryptocurrency exchanges like Coincheck, Japan introduced stricter measures for exchanges willing to operate in the country. The FSA also granted self-regulatory status to the Japan Virtual Currency Exchange Association (JVCEA).

South Korea, on the other hand, banned Initial Coin Offerings and anonymous cryptocurrency trading in the country. However, South Korea announced it was going to give its official stance on ICO in November 2018. Recently, seven digital currency exchange met in South Korea to create a crypto ecosystem in the country.

The Thailand SEC which previously approved the operation of seven cryptocurrency exchanges recently warned investors about some unregulated ICOs.

Image courtesy of Shutterstock.

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