APRIL 2021




"Turkey revealed plans to ban software-based “digital tokens” as a form of payment starting from April 30 in an attempt to combat a flight from the tanking Turkish lira." "Aykan Erdemir, senior director of the Foundation for Defense of Democracies’ Turkey Program, said the central bank ban incited fear that even holding cryptocurrencies, a hedge against double-digit inflation and lira devaluation, might be eventually declared illegal." “Cryptocurrency is Turkey’s final frontier. It’s almost like the last safe haven citizens believe is out of Erdoğan’s reach.”


"Founded in August 2017, Vebitcoin [was] a digital asset trading platform based in Turkey. It [had] a variety of cryptocurrencies and aims to give users the opportunity to chart their financial path in Turkey and around the world." "As Vebitcoin, our biggest goal is that you, our users, can move freely in the security and financial field. In this course, our efforts and goals that we have transferred and developed from yesterday to today will accompany you tomorrow. We have an important role in this sector yesterday, today and tomorrow, and we will continue to do so." "Vebitcoin – which had some 200,000 clients – stopped trading on April 23." "As a countrywide cryptocurrency ban looms, multiple Turkish exchanges have now come under investigation with four employees of the recently-shuttered Vebitcoin exchange arrested this morning for allegations of fraud." "According to CoinGecko data, Vebitcoin had almost $60 million in daily trading volumes prior to its collapse." "Vebitcoin is the exchange that supports the highest amount of coins and tokens among the 4 highest trading volume cryptocurrency exchanges."


"Vebitcoin described itself on the company website as the “Turkey partner” of BitGo, the California-based digital asset security company BitGo. "All products on our stock exchange, which is a Bitgo partner, are covered by insurance," it noted." "A tweet from 4 June 2020 said, “Vebitcoin is the Turkish partner of BitGo, the world's most important cold storage cryptocurrency bank”" "The most comprehensive insurance in the industry, provided with the UK-based insurance company Lloyd's of London, was announced by BitGo." "But in a call with Decrypt, a spokesperson for BitGo clarified that Vebitcoin has only been its hot wallet client—not a cold wallet client—and certainly not its partner." Prior to closing, the platform posted a notice on their website: “Due to the recent developments in the crypto money industry, our transactions have become much more intense than expected. We have decided to cease our activities in order to fulfill all regulations and claims. We will provide you with information as soon as possible.” "Vebitcoin also disclosed, “We would like to state with regret that this situation has led us to a very difficult process.”"


"The Financial Crimes Investigation Board (MASAK) initiated an investigation into Vebitcoin and its managers." "Following the search and seizure operations carried out at the company headquarters and at some addresses, 4 people, who are company directors and employees, were detained." "Cybercrime police in the southwestern Mugla province arrested the suspects – the company head, two employees and the spouse of one of its partners." "Vebitcoin’s Chief Executive Ilker Bas, along with three other employees, were taken into custody." "The investigation carried out by the Directorate of Cyber ​​Crimes Branch of the Muğla Police Department is carried out in a multifaceted and meticulous manner." "Turkish police have blocked Vebitcoin’s domestic bank accounts."

There is a significant difference between the simple protection layer provided by BitGo and a multi-signature wallet which requires the authorization of multiple exchange operators. In addition, the BitGo wallet was an online hot wallet. Finally, it appears that the exchange may have been operating fractionally. There is little evidence that any of the operators had any sort of training for what they were doing.


False insurance claims are all-too-common. There is the strongest incentive for both insurance providers and platforms to imply that more is protected than actually is, and policy details aren't available, even if one had the time to read through them. It's very clear that this claim would have gone a long way towards assuring customers of the platform of the safety of their funds. It is just one of the many problems with third party insurance.


When things went wrong, of course there was no one to turn to for help, and the government immediately arrested them, cementing the loss for all customers.


Our proposed framework would have provided training to the operators of the platform, before allowing them to operate. That would have included multiple case studies and storage best practices that would have prevented the loss.


The backing of funds is monitored over time, to ensure all platforms are fully backed. Were individual events to happen, we propose an industry insurance fund which is able to provide support, assist customers, and prevent losses.


Check Our Framework For Safe Secure Exchange Platforms

Sources And Further Reading

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