A small Canada-based crypto exchange called MapleChange has pulled off an exit scam, disappearing with user funds.
The exchange has deleted its website, Twitter account, and other social media handles along with the identity of its executives and chief executive officer.
The disappearance of MapleChange with user funds has led experts in the sector to encourage crypto investors to prevent the utilization of minor exchanges with no reputation and cold wallets that accurately represent their holdings.
Suffered a “Hack” But Can’t Refund Users, CEO Hunted Down
On Oct. 29, MapleChange claimed that it suffered a security breach that led to the loss of user funds. However, the exchange did not mention the involvement of law enforcement or any technical intricacy of the supposed hack.
Suspicious about the incident, users started to demand more information and almost immediately after the “hack,” the exchange decided to shut every channel of communication down.
The MapleChange team said:
“Due to a bug, some people have managed to withdraw all the funds from our exchange. We are in the process of a thorough investigation for this. We are extremely sorry that it has to come to end like this. Until the investigation is over, we cannot refund anything.”
Absurdly, the exchange said that due to the hack, the exchange is not able to pay any user back and closed down all of its social media accounts.
“We have sustained a hack, and we are investigating the issue. Because we have no more funds to pay anyone back, the exchange has to close down unfortunately. This includes all of our social media.”
As seen in previous security breaches of major exchanges like Bithumb in South Korea and Coincheck in Japan, in an event of a hack, exchanges cooperate with local financial authorities and government-backed intelligence agencies to investigate the hack and potentially recover the funds lost in the hack.
A small crypto exchange pulled off an exit scam, taking all customer funds.
There is no incentive for using small exchanges. Use established exchanges that are regulated, & transparent.
Small exchanges also focus on maximizing profitability, not security or investor protection pic.twitter.com/iKEO8rDv5z
— Joseph Young (@iamjosephyoung) October 28, 2018
MapleChange showed no intent of recovering user funds or compensating its customers, instead of shutting down the platform and social media accounts related to the business.
Investors affected by the fraudulent operation formed a group called “Maplechang’ed,” to disclose the identities of executive behind the exchange and locate the team responsible for the exit scam.
Within hours after the incident, the group of investors found the identity of the CEO of MapleChange to be Glad Poenaru, a service technician at American Piledriving Equipment, whose location matched that of MapleChange.
— maplechang'ed (@Maplechanged) October 28, 2018
At this time, it remains unclear if Poenaru is wholly responsible for the operation but if he is, Maplechang’ed firmly stated that the group will initiate legal action against the individual.
Binance CEO Calls For Transparency, Cold Wallet Holdings of Exchanges
Changpeng Zhao, the CEO of Binance, the world’s largest crypto exchange which recently expanded to Singapore to operate its second fiat-to-crypto trading platform, called for the ranking of exchanges by amount held in cold wallets, as it is not possible for exchanges to fake holdings in cold wallets.
Wow, some one should rank exchanges by wallet storage. https://t.co/TffMHOnS1J
— CZ Binance (@cz_binance) October 28, 2018
Small crypto exchanges often focus on maximizing profitability over security and investor protection. Several exchanges in South Korea were hacked because the trading platforms allocated all of their resources in listing new tokens and building features without establishing necessary infrastructure and security measures to protect user funds.
For security and protection, it is of utmost importance for crypto investors to rely on established, reputable, transparent, and regulated cryptocurrency exchanges that have the capability of protecting user funds and compensate investors in an unfortunate event of a security breach.
Cover Photo by Taskin Ashiq on Unsplash