HO CHI MINH CITY -- Ho Chi Minh City authorities ordered an investigation on Wednesday into the apparent theft of $660 million through scams linked to cryptocurrency startups.
The probe was a response to protesters who gathered downtown of the Vietnamese city to demand the return of their money.
Photos posted Sunday on Facebook, the most popular social network in the country, showed dozens of people in front of the company Modern Tech with banners saying: "Cryptocurrency -- the biggest multi-level scams, more than 15 trillion dong," which converts to $658 million.
They demanded compensation from the company, advertised to be the official representative in Vietnam for two initial coin offerings by Singapore's iFan and Dubai's Pincoin. An ICO is a means of raising funds whereby companies issue digital tokens in exchange for virtual currencies like bitcoin.
Authorities say Modern Tech is a Vietnamese company that registered on Oct. 31 but temporary closed on March 3.
Some 32,000 investors lost up to $660 million in total, according to local media reports. This tops the roughly $530 million in cryptocurrency stolen by hackers from Japanese virtual-currency exchange Coincheck in January, an incident that sent shock waves rippling through the global cryptocurrency industry.
Video posted on social media showed Modern Tech staffers holding signboards displaying high yields expected from investment in the two ICOs. Modern Tech touted an annual return of over 570%, compared with 16% for banking deposits or 17% for real estate investment. Local celebrities joined the events, and investors were promised an 8% reward for bringing in others. Investors said a group of seven Vietnamese who founded Modern Tech had instructed them to put money into the scheme.
A woman in Ho Chi Minh City told the Nikkei Asian Review that she was encouraged to invest money to obtain Pincoin tokens that could be exchanged later. But she had no chance to get the money back, and lost her entire $3,000 investment.
IFan was introduced as "the most advanced social network" for celebrities and artists, enabling them to connect with fans who could trade tokens for albums, performance tickets, merchandise and endorsements.
Pincoin was marketed simply as an "investment opportunity" promising up to 40% monthly returns, but the Cointelegraph news wire reports that Pincoin has been under suspicion online for months. Financial scam directory BehindMLM in February released an analysis noting that Pincoin's buy-in method and opaque nature were characteristics of an "ROI Ponzi" scheme.
Several services in Ho Chi Minh City accepted payment in bitcoin. Leading information technology group FPT considered a pilot last October to let students at its education arm pay school fees with bitcoin.
However, bitcoin payments were mostly halted after the State Bank of Vietnam, the central bank, affirmed in October that cryptocurrencies are not a lawful means of payment. Using, issuing and supplying cryptocurrencies like bitcoin, DasCoin, iFan and Pincoin have been subject to a $9,000 fine since January in Vietnam.
Yet the fine failed to stop Vietnamese investors from engaging in trades and transactions. As of October, the city customs agency received declarations for importing 1,500 cryptocurrency mining machines. Bitcoin ATMs were installed, allowing people to withdraw cash from their digital money accounts.
Statistics on Vietnamese cryptocurrency investors are lacking. But figures from SimilarWeb last year showed that Vietnamese ranked at the top on cryptocurrency exchange Remitano. They accounted for 88.7% of website access, mainly buying bitcoin and Ethereum as Remitano accepts the Vietnamese dong for payment.
Vietnam also ranks second on CoinMarketCap.com, which provides information on over 1,400 cryptocurrencies, as well as on the Bittrex platform. When Bitconnect crashed in January, some 53,000 investors in Vietnam reportedly lost money.
The Vietnamese government, looking to protect the rights of investors, has urged the Ministry of Justice and central bank to quickly complete a legal framework for managing virtual currencies in the country.