Three months after trying to withdraw money from a Canadian cryptocurrency bank called Einstein Exchange, Reddit user LezzBeFriendz received a terse message: Stop emailing or we’ll suspend your account.
“As you have been told several times by several of my team members, by constantly emailing in you are further slowing down our processing times and causing further delays in your withdrawals,” read the Oct. 15 message from Einstein Exchange.
“Please stop continuously emailing in, it is adding to our backlog. We will email you with any updates or when your pending withdrawals have been processed. Please be aware that constantly contacting support via chat and email will result in your account being disabled/blocked on our platform.”
The message was a red flag for Einstein Exchange’s customers—and it turns out that law-enforcement had some concerns, too.
Einstein Exchange billed itself as a trustworthy alternative to other cryptocurrency exchanges, where customers lost millions to various scams and hacks. But now Canadian authorities have accused the bank of vanishing with $16 million in investors’ money and locking their offices.
Cryptocurrency, a form of digital money, works without centralized banks. The system can be a perk and curse. Although cryptocurrency is harder to trace and more volatile than traditional currency (sometimes leading to huge gains for investors), it can also be a pain for everyday investors to buy and trade. To streamline the process, an industry of cryptocurrency trading companies have offered bank-like services, where customers can theoretically deposit and withdraw their digital money.
But unlike a good bank, Einstein Exchange wouldn’t let customers cash out, Canadian authorities say.
A Vancouver-based customer who claimed to have lost $7,000 in the exchange told The Daily Beast he’d invested because the company had physical offices near him, unlike other companies without brick-and-mortar locations.
“They had an office where I could deposit funds into my account in person, and not have to wait for a few days,” the customer said. “They also had no fees involved with depositing funds unlike some other exchanges.”
He said he asked to withdraw his funds on Sept. 9, two months before Einstein Exchange’s website went dark.
“I was contacting them through email and live chat asking when the hold on my withdrawal request will be complete. They kept telling me they have a backlog of transaction requests and they need to manually process them,” he said.
“The reason I gave them so much time is because I met a couple of employees in person when I deposited my cash. It all seemed normal at their office, which was over a couple of months ago. Then, they stopped the live chat support. I sent them a couple of emails but did not get a reply.”
In a Nov. 1 filing, the British Columbia Securities Commission claimed Einstein Exchange suddenly shut down without returning more than $16 million in customers’ money (including nearly five times more U.S. dollars than Canadian, suggesting the exchange was popular stateside). When a BCSC investigator visited the company’s Vancouver headquarters, he discovered the offices on lockdown. None of Einstein Exchanges’s phone numbers were operational, according to the filing.
When the investigator reached out to Einstein Exchange’s lawyers to ask where the money had gone, the attorneys claimed they no longer represented the company. Einstein Exchange’s website went dark shortly thereafter.
The investigation confirmed a rumor that had been growing on Reddit for weeks: Einstein Exchange had cut and run. The company used to allow clients to stroll into its offices for withdrawals, like they might in a conventional bank. But last Wednesday, a Redditor posted a picture from the building’s lobby. The elevator to the offices was locked and covered with a piece of printer paper asking customers to make appointments via email. (The company did not return The Daily Beast’s requests for comment at that email address.)
According to the Redditor who posted the picture, Einstein Exchange had been on the lam since at least mid-November
“I was told by a worker in another company in the building that the sign had been up for two weeks and that the person had not seen anyone of the Einstein company around for at least that amount of time,” the Redditor claimed.
Redditors who claimed to have invested thousands in the exchange began speculating that they’d been played.
“Most likely exit scamming,” one wrote two weeks ago, before the BCSC investigation. “They are not even meeting any customers in person now. It says to make an appointment through email. Used to be able to [walk] into the office and meet with an employee.”
One customer, Vancouver technologist Scott Nelson, filed suit against the company’s owner two weeks ago, CBC News reported. Nelson claimed he’d banked 50 Bitcoin (roughly $468,000 U.S. dollars) in the exchange, but that the company “repeatedly blamed technical issues” when he tried to withdraw his money. Another investor, the Hong Kong company Sino Allied, filed a lawsuit over what they claimed was a $1 million cryptocurrency purchase gone bad.
Complaints of missing money were common with Einstein Exchange. But previously, the company had dismissed them as evidence of a booming business. Last January, when cryptocurrency prices skyrocketed, Einstein Exchange claimed to see a surge of business—and with it, a backlog of orders.
Customers accused Einstein Exchange was hoarding their money. “This company is shady and doesn’t seem to care about their customers,” one told the Vancouver Sun at the time. “There seems to be no hope in getting my money back.”
Michael Gokturk, the exchange’s founder, told the outlet he was “heartbroken” to hear complaints, and blamed the missing money on too many customers. (Nevermind that Einstein Exchange promised wait times of one minute or less.)
The controversy was the second in recent years for Gokturk, who was involved in a bitter board battle at his previous company. In a series of warring press releases, he and company rivals accused each other of deceit.
“Gokturk relentlessly makes false promises,” one 2017 press release from a trio of rivals read. (One of those competitors is now suing Gokturk for defamation.)
This month, the BCSC placed Einstein Exchange in a receivership, in a bid to protect whatever of the $16 million in customer funds remain.
Some Einstein Exchange customers on Facebook and Reddit have publicly mulled filing a class action suit against the company.
But not all are optimistic about seeing their money again. The Vancouver investor who claimed to have lost $7,000 described the exchange as “all done and gone. It seems like they were playing some sort of a Ponzi scheme using new user funds to pay out some customers only so they could keep this fraud going for as long as they could.”