The provincial securities commission has stepped in as the firm faces a storm of criticism and litigation
A beleaguered cryptocurrency exchange in Vancouver is under investigation as the B.C. Securities Commission (BCSC) determined it to be accountable for over $16 million to its customers.
The securities regulator has had to step in after receiving complaints from customers of the Einstein Exchange who reported being unable to access their assets. “We had sent some requests for information to the exchange twice and we didn't get an answer,” BCSC executive director Peter Brady told CBC News.
As reported by the news outlet, the regulator found out from the exchange’s legal counsel that it plans to shut down within 30 to 60 days due to a lack of profit. The company’s legal counsel eventually stepped down, raising concerns for the BCSC.
After filing a petition claiming founder Michael Ongun Gokturk could not be reached, the BCSC obtained an order from B.C. Supreme Court appointing an interim receiver to oversee the Einstein Exchange. While the exchange claimed in court documents that it had “sufficient assets to satisfy withdrawal requests from customers,” the BCSC said that the exchange’s lawyers refused to specify where those assets were kept.
In an affidavit, BCSC investigator Sammy Wu suggested that “Einstein improperly used their customers’ assets,” reported CBC News. He said that based on commission staff’s determinations, the company owes customers over $16.3 million, including more than $11 million in cryptocurrencies and some $5 million in cash.
Wu reported visiting the Einstein Exchange last Friday, only to find the elevator “locked for all floors.” He also claimed to call Gokturk’s phone number as indicated on the company site, which connected to a voice recording saying that all the company’s agents were unavailable.
“I called Gokturk and his voice mail said that he is unavailable and to send a text message since he does not check voice mail,” Wu said.
CBC News reported that the exchange has faced complaints from customers as early as its launch month, when customers aired grievances over slow staff responses and fears that they might lose their money. Claiming that his team was facing overwhelming demand for digital currency, Gokturk promised that “no one will lose their money here.”
Since then, the company website has been taken down, but the Facebook page remains online. Many customers have posted on the page demanding their money back and warning others about issues.
Aside from complaints, the Epstein Exchange is reportedly facing two civil suits filed last month. Sino-Allied, an entity based in Hong Kong, filed a notice of civil claiming maintaining that the exchange still owes it US$1 million from an agreed-upon Tether purchase. Vancouver technology entrepreneur Scott Nelson, meanwhile, has alleged that Gokturk owes him for 50 Bitcoin worth some $535,000.
After Gokturk “repeatedly blamed technical issues” for his failure to wire money to Nelson, he reportedly promised to provide a bank draft, which Nelson claimed he never got.
“Gokturk has not filed responses to either of those lawsuits,” CBC News said.
Citing BCSC Executive Director Peter Brady, the news outlet added that the commission has notified the RCMP of possible money laundering based on concerns raised by a former employee of the exchange.