More than 300 investors reported a suspected cryptocurrency scam to Vietnamese authorities on Tuesday after the head of a bitcoin mining startup disappeared along with $35 million in client money.
Le Minh Tam, director of Sky Mining, reportedly absconded to the U.S. a few days ago.
The case comes three months after Vietnam saw the biggest racket in cryptocurrency history, where investors said they were robbed of as much as $660 million in initial coin offerings, including Singapore’s iFan and Dubai’s Pincoin. No further developments in that case have been reported since April.
Mining and using cryptocurrencies remains illegal in Vietnam, according to the central bank, but investors here continue to be drawn by the promise of rich returns. Tens of thousands have reportedly lost money in scams or crashes in coin prices just this year.
In the new heist, Sky Mining investors said they were persuaded to invest in cryptocurrency mining machines — computers that perform the complex calculations needed to create new bitcoins — with a promised 300% annual return, plus extra interest for drawing in new buyers.
The operation was premised on the view that the price of bitcoin will reach $16,000 this year, up from about $7,700 now. Sky Mining promoted itself as the wholesale partner of Bitmain, China’s biggest bitcoin miner.
Around 5,000 individual investors across Vietnam, as well as foreigners including Nigerian and Japanese citizens, are reported to have joined the Sky Mining network, with the investments ranging from $500 to more than $20,000. Cryptocurrency mining remains illegal in Vietnam, according to the central bank.
Sky Mining registered in Ho Chi Minh City this January as an information technology dealer. Since March, the company has organized conferences and workshops to recruit investors in coin-mining farms, with the goal of spreading the network across Vietnam in 2019. The company website shows 18 active farms, as well as an office in Japan.
More than a week ago, Le Minh Tam posted a message on the site asking forgiveness from investors for an “unpredictable” drop in the bitcoin price that had undercut returns. He invited investors to come to the head office to collect their machines and a refund.
But one group of investors found the company’s mining facility and office empty when they went to pick up their mining machines last Friday. Le Minh Tam could not be reached. Sky Mining deputy director Le Minh Hieu said the chief had stolen all the money and fled to the U.S., a local newspaper reported.
The case was reported to the authorities after a 44-second video was posted Sunday on Facebook in which the vanished director said he had gone to the U.S. for medical treatment. He said that more than 100 agencies and individuals in Vietnam had collected the machines to keep them mining while he is away. “I am not hiding or running away, and will be back as soon as possible,” said the man in the video.
Investors, however, said Le Minh Tam was trying to buy time to escape from Vietnam with the money. Some lawyers described Sky Mining’s business model as a “Ponzi scheme.”
Cryptocurrencies arrived in Vietnam a few years ago when some services in Ho Chi Minh City began taking payment in bitcoin. Bitcoin ATMs have been installed in the country, allowing users to withdraw cash and buy the cryptocurrency.
FPT, Vietnam’s biggest IT company, also considered a pilot program to let students at its education arm pay their tuition in bitcoin. The central bank has told investors and cryptocurrency users to wait for the authorities to work out a legal framework for managing virtual currencies.
Meanwhile, similar coin-mining farms in Vietnam, including Eco mining and Asama mining, are still attracting investors with promises of high yields.
Vietnamese are among the most active users of cryptocurrencies, especially bitcoin, along with Japanese and South Koreans. Figures from SimilarWeb in 2017 showed that Vietnamese investors ranked at the top on cryptocurrency exchange Remitano, and second on CoinMarketCap.com and the Bittrex platform.