Reports are being made all over the internet that Ireland-based cryptocurrency exchange Bitsane has vanished, taking as many as 246,000 users’ crypto deposits with it (daily traded volume of just over $7 million). Bitsane LP (formerly listed as one of Ripple’s approved exchanges) launched in 2016 in Dublin and pitched the exchange as an option for investors seeking to trade XRP ahead of its listing on major platforms such as Coinbase. User withdrawals on Bitsane began faltering in May 2019 citing technical reasons and by June 17, both the Bitsane site and its social media accounts had been deleted, with emails to Bitsane accounts bouncing back as undeliverable. Neither the exchange’s CEO — Aidas Rupsys — nor its chief technology officer, Dmitry Prudnikov, could be reached by journalists or clients and the FBI are investigating. Estimated losses could be in the scope of tens or hundreds of millions of Euros and being unregulated, there is little scope for compensation.
A separate firm, incorporated in the United Kingdom as Bitsane Limited (Azbit) by Maksim Zmitrovich in August 2017, attempted to purchase a licence in Bitsane’s code for Azbit. Bitsane Ltd (UK) claim that it was required by Dublin’s Bitsane team to use the name Bitsane as a condition of the deal yet the desired partnership between the two firms failed to materialize when the Dublin firm stopped responding in April. (This licence condition is so unusual that it should have rung alarm bells on its own). Earlier in June, Polish crypto exchange Coinroom reportedly shut down its operations and disappeared with customer funds, having notified users they had just one day to withdraw funds before their contracts would be terminated.
Despite repeated claims of crypto-exchanges disappearing with client funds, G20 countries have discussed bringing crypto-exchanges into regulation and applying life-boat compensation schemes up to £25,000 but repeated delays have meant that outside a number of small jurisdictions, no major player has implemented this, perhaps as they fear the size of potential claims. It could be argued that the mainstream legislators are aware that there will be huge scams but don’t understand the market enough to be able to create effective regulation, or are concerned at the potential scope of losses that they would be underwriting.