GBL Exchange Exit Scam
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GBL Exchange was a cryptocurrency exchange which claimed to be based in Hong Kong. The perpetrators were arrested within 3 months in December 2013.
This exchange or platform is based in China, or the incident targeted people primarily in China.[1][2][3][4]
About GBL Exchange
The operators claimed to be from Hong Kong[5][6], when in fact they were three citizens of Beijing in mainland China[6].
"At the time, there was a Bitcoin craze in China, which lasted for much of the latter half of 2013 and was credited as the leading cause of the November 2013 bubble."[6] "The rise of Bitcoin, the famous open source virtual currency, has been a fascinating story. Started just four years ago, the value of a Bitcoin (abbreviated as “BTC”) recently hit a new high of 425USD, an impressive jump considering that its value at the beginning of 2013 was around 13USD. Even more impressively the market cap for the entire Bitcoin currency system of 11,986,700 BTC is, as of writing, just over 4.75 billion USD."[7]
The exchange reportedly promoted itself extensively online by barraging online communities with fee waivers for new users[1][4].
The Reality
"There were more than a few clues that GBL was not on the up-and-up. A big red flag was the issue that the company’s servers were located in Beijing even though the GBL web site claimed to be in Hong Kong. Then there was the problem that while the exchange had registered with the Hong Kong authorities a financial services license had never been issued. Finally there was the capping by the exchange in early October of the amount of money users could convert into other currencies and the issuing of shares in GBL in lieu."[7]
"The company registered its domain in Hong Kong, but was based in China. It never obtained the licenses to run a financial services firm. The site lifted some of its content from elsewhere on the web and used a Gmail address instead of a corporate email domain."[1]
What Happened
"Unfortunately for the GBL investors the exchange turned out to be a con and on October 26 the people behind the scheme absconded with all of the funds"
| Date | Event | Description |
|---|---|---|
| May 2013 | Start Of GBL Exchange | According to BitcoinTalk, the exchange ran between "Between May 2013 to October 2013"[6]. This is matched by an article in Network World[7]. |
| October 26th, 2013 | Absconding With Funds | The platform shut down on October 26th, 2013[5][6][1]. "Unfortunately for the GBL investors the exchange turned out to be a con and on October 26 the people behind the scheme absconded with all of the funds".[5] "on October 26 the people behind the scheme absconded with all of the funds in the form of Bitcoins which are, of course, untraceable"[7] |
| November 13th, 2013 8:55:32 PM MST | Network World Article Published | Online news outlet Network World publishes information about the GBL exchange[7]. This includes some background on the bitcoin price at the time, the exchange, red flags, and the ultimate outcome[7]. This article describes bitcoin as "untracable"[7]. |
| November 14th, 2013 3:45:00 AM MST | The Daily Beast Article Published | The Daily Beast mentioned the price rise of bitcoin, along with the recent multi-million dollar loss stemming from the GBT exchange[1]. |
| December 2013 | Founders Arrested | The founders of the GBL exchange are arrested in mainland China. (They had incorrectly claimed to be from Hong Kong.) |
Technical Details
This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?
Total Amount Lost
Kyle Gibson reported the amount lost at 9,640 BTC[5], with an estimated value of $4,100,000 USD[5]. Comparitech also uses the figure of $4.1m USD[8]. An article from Network World notes that "almost 1,000 people deposited around $4.1 million in Chinese Yuan"[7]. Daily Beast says "as much as $4.1 million USD worth" of bitcoin[1].
A post on BitcoinTalk estimated that 22000 BTC were taken[6] and lists the value of the stolen bitcoin at $3,437,446 USD[6], or the equivalent of 4185.734 BTC in January 2014 when compared against other events at a similar time frame[6].
Immediate Reactions
How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?
Ultimate Outcome
... "Bitcoin reached an all-time high of more than $400 on Wednesday, just weeks after a multimillion-dollar exchange in China disappeared."[5]
This actually ended fairly quickly with their arrest within 3 months in December 2013.
The incident was included in a timeline put together by Kyle Gibson[5], a post on BitcoinTalk[6], and a guide on BitcoinExchangeGuide[9]. The incident is also included in a summary by Comparitech[8].
"While this virtual heist should have dampened overall Bitcoin market confidence it has hardly made a ripple and the price of BTC has remained strong. In the long term however this is yet another lure for regulators in every country to start looking at Bitcoin with an eye to reigning the currency in to bring it under some kind of governmental control and inevitably tax it into submission."[7]
Total Amount Recovered
There do not appear to have been any funds recovered in this case.
What funds were recovered? What funds were reimbursed for those affected users?
Ongoing Developments
What parts of this case are still remaining to be concluded?
General Prevention Policies
Coming soon.
Individual Prevention Policies
No specific policies for individual prevention have yet been identified in this case.
For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.
Platform Prevention Policies
Policies for platforms to take to prevent this situation have not yet been selected in this case.
For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.
Regulatory Prevention Policies
This highlights the importance of mandating transparency and a proper registry for exchanges.
No specific regulatory policies have yet been identified in this case.
For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.
References
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 The Missing Bitcoin Millions - The Daily Beast (Accessed Nov 8, 2024)
- ↑ http://www.coindesk.com/4-1m-goes-missing-chinese-bitcoin-trading-platform-gbl-vanishes/
- ↑ https://www.businessinsider.com/bitcoin-exchange-gbl-holding-41-billion-vanishes-2013-11
- ↑ 4.0 4.1 http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20131105000045&cid=1102
- ↑ 5.0 5.1 5.2 5.3 5.4 5.5 5.6 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents - Kyle Gibson (Accessed Jan 25, 2020)
- ↑ 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses - BitcoinTalk (Accessed Feb 15, 2020)
- ↑ 7.0 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 Chinese Bitcoin exchange vanishes along with bitcoins - Network World (Accessed Nov 8, 2024)
- ↑ 8.0 8.1 Worldwide crypto & NFT rug pulls and scams tracker - Comparitech (Accessed Dec 15, 2022)
- ↑ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Accessed Mar 5, 2020)