U.K. Cryptocurrency Exchange Cubits Shuts Down After $33M Scam

Kathleen Jordan
By Kathleen Jordan
Posted on Dec. 14, 2018
U.K. Cryptocurrency Exchange Cubits Shuts Down After $33M Scam

A London-based digital asset trading platform, Cubits, has been forced into administration after fraudsters reportedly stole €29 million (about $32.5 million) from the cryptocurrency exchange in February. Cubit claimed “it fell victim” to an elaborate scam orchestrated in collusion with three of its clients.

The administration means that investors cannot deposit or withdraw funds until further notice. It is also not clear how much worth of bitcoin the crypto exchange was holding on behalf of customers at the time of closure.

Cubits, the trading name of legal entity Dooga Ltd., said the “serious criminal act” had crippled business operations and “finally led to the difficult decision to place the company into administration.”

Three Chinese traders allegedly purchased Bitcoin (BTC) through the platform via Pay Secure Online (Paysec), a payment processor based in Malta. However, Paysec never remitted the funds to Dooga, in an alleged scam. Cubits has now filed a lawsuit in Malta to force Paysec to reimburse the €35 million ($39.2 million it supposedly owes the exchange. The reimbursement claim includes funds from the three Chinese accounts and others.)

Cubits has now appointed Trevor Binyon and Steve Parker of Opus Restructuring & Insolvency as joint administrators. The company said in a statement that it had failed to recover from the “criminal act”.

The company stated:

"The criminal act happened in February 2018 and involved the accounts of three clients. Bitcoins with a market value at that time of approximately €29 million were properly delivered and subsequently withdrawn, with the customers apparently colluding with fraudsters. Dooga has never received the equivalent in fiat from the payment processor responsible for carrying out the transaction."

Dooga also stated that it had informed the responsible authorities in the U.K., Malta, China and Germany of the scam. It has also filed several criminal complaints. However, nothing has materialized, forcing the exchange to file for administration.

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