The revelation by the British Columbia Securities Commission (BCSC) has sent shockwaves through the crypto community, unearthing the unsavory practices of the now-defunct Canadian crypto exchange, Einstein Exchange. In a detailed report, the BCSC has accused the platform of operating as a Ponzi scheme, a situation that has left many investors out of pocket and seeking answers.

Uncovering the Scandal

According to the BCSC, the Vancouver-based Einstein Exchange, led by Michael Ongun Gokturk, turned to fraudulent means after facing insolvency in early 2018. The exchange continued to accept new deposits while using these funds to pay off other customers, a classic hallmark of a Ponzi scheme.

The Regulator’s Findings

The BCSC’s investigation revealed that Einstein Exchange falsely claimed to act as a counterparty to customer trades without possessing the necessary crypto assets. This led to a significant mismatch in the exchange’s ability to fulfill customer orders.

Manipulation and Deceit

Evidence suggests that Einstein Exchange manipulated their customer dashboards, displaying misleading information about orders and asset availability. The BCSC estimates that Gokturk’s deceptive practices resulted in customer losses amounting to approximately $19.1 million CAD.

A Short-Lived Venture

Despite its initial promise as a promising trading platform for a variety of cryptocurrencies since its inception in 2017, Einstein Exchange’s misconduct has led to its downfall. At its peak, the exchange and its associated entities held over $34 million CAD in cash and crypto assets for their clients.

Legal Intervention

The Supreme Court of British Columbia stepped in during 2019, granting the BCSC’s order to appoint Grant Thornton as the interim receiver to manage the seized assets of the troubled exchange.