Encryption asset market frenzy triggers security risks

Recently, as the prices of mainstream encryption currencies have skyrocketed, investors have flocked to the market in search of profit opportunities. However, this craze has also attracted the attention of criminals, and some trading platforms have begun to exploit this opportunity to carry out fraudulent activities. On February 23, 2024, a so-called encryption exchange claiming to be headquartered in Hong Kong suddenly closed its website and withdrew $57 million in funds, setting a record for the "first run" in the local encryption asset circle this year.

Scams in Exchanges

This exchange is actually a platform that has existed before but has just changed its name. As early as 2019, the platform artificially inflated its trading volume through various means, such as multiple accounts buying and selling with each other, cross-platform trading, etc. According to a report from a well-known third-party data analysis organization, the platform's actual trading volume is only about 0.125% of its publicly available data. Nevertheless, due to the lack of effective regulation, the platform can still attract retail investors through frequent listings of small coins, wash trading, and other methods.

Two days before the exit scam, the trading data of the platform experienced a sharp decline, which was actually a clear warning signal. Ultimately, the platform withdrew approximately $56.5 million in encryption assets within a day, including $54 million in TRB, $1 million in ETH, and $250,000 in USDC.

How Investors Can Mitigate Risks

1. Stay away from small unknown exchanges: This is the most basic and also the most important principle. Even experienced investors may overlook risks due to overconfidence or the temptation of short-term gains.

2. Make good use of third-party data tools: Proper use of various data analysis tools can help investors identify abnormal behaviors on the platform. For example, by standardizing trading data, one can discover significant discrepancies between the actual trading volume of certain platforms and their publicly available data.

3. Pay attention to personnel changes in the platform: If a cryptocurrency platform lacking effective regulation undergoes significant personnel or shareholder changes, it often signifies potential risks. In this case, the platform's CEO suddenly resigned a month before the incident, which should have raised concerns for investors.

Cross-Border Rights Protection Channels

For such fraud cases occurring in the Hong Kong region, mainland investors can consider the following rights protection measures:

1. Report to the Hong Kong police or relevant authorities to request the freezing of the involved accounts.

2. If large sums of money are involved and there is a risk of transfer, you may entrust a lawyer to apply for an emergency injunction from the Hong Kong court.

3. Pursue compensation for losses through civil litigation. Possible causes of action include fraud, unjust enrichment, and legally constituted trust.

4. If certain difficult-to-obtain evidence is needed, a lawyer can apply to the court for a disclosure order.

It is worth noting that the asset recovery and loss mitigation system in Hong Kong differs significantly from that in the mainland. The judicial authorities in Hong Kong are primarily responsible for handling criminal cases themselves and do not directly take on the responsibility of recovering funds for the victims. Therefore, victims usually need to initiate separate civil lawsuits to recover their losses.

Conclusion

When participating in investments in the encryption asset market, it is essential to maintain a cautious attitude. Remember not to be blinded by short-term high returns and to fully recognize that certain platforms may covet investors' principal. It is particularly important to note that if related cases occur in other overseas regions, the difficulty of recovering losses may be greater. Investors should remain vigilant at all times and carefully choose trading platforms to ensure the safety of their assets.