During the catastrophe of Mt. Gox, Zhou Tong and his Bitcoinica became a bit of an unproven scourge to the Bitcoin community. People were quite confident at the time that Tong had stolen funds on at least several occasions.

A recent investigation further into the matter made it plain that something was going on, something very much unlike what Zhou Tong was claiming. Tong’s Bitcoinica claimed to have lost 43,554 bitcoins as a result of hacking at Linode. They offered significantly little evidence to this effect, and were largely mysterious when queried for specifics. What came out in the more recent dive into the evidence was that there was a payment made to BitcoinTalk owner Michael Marquadt also known as Theymos.

Two more thefts occurred with the same template. The hack would occur, many thousands of bitcoins would disappear, and Tong and his crew would work overtime to calm investors down and maintain them. The novelty of Bitcoinica was that it allowed traders to bet on a contract-for-difference market in Bitcoin. Similar to short/long betting on the traditional stock market, investors must have found this a profitable enough endeavor to keep on with Bitcoinica. But as CCN writer John Bitweru Maina wrote earlier this year,

From the beginning Zhou Tong opted to outsource everything that he could not do himself including sysadmin, security and banking according to an interview that was published in mid-2012. In explaining this decision, Zhou Tong said that it had to do with wanting to keep operating costs low. Isn’t it also possible that it was done this way to create the conditions for plausible deniability later on?

Tong Co-Founds CoinJar

A Reddit post from early this year made it plain that Tong was involved with CoinJar, a New Zealand start-up Bitcoin exchange. The discussion there had some of the people from the 2012 thefts still unsatisfied, having never received their promised refunds. It certainly raises a lot of flags that someone can fail so miserably at something, losing in excess of 120,000 bitcoins in the space of several months, and still turn around to form another Bitcoin company. Even Mark Karpeles was not as brazen as that, and Josh Garza hasn’t bothered (yet) to try and bilk eager “cloud miners” again.

A co-founder is a pretty important position at any company. Even if one plays a minimal operational role, which judging by Tong’s previous business operation style is probably the case, one still makes a mark in company decisions. If or when allegations against Tong are ever proven, CoinJar will have on its hands a confirmed scam artist very near to the top of the decision tree. This by itself can be troublesome, especially in finance.

In response to a query on the matter from Bitcoin angel investor Roger Ver, CoinJar’s other co-founder, Asher Tan, said:

I have done my best to reach out to parties who have a strong opinion on the video (including yourself) to dissect and understand what is being shown. The overriding response is it is not conclusive proof of wrongdoing. It however does emphasise the large amount of the bitcoin economy that flowed through Mt Gox and Bitcoinica at that time (more than half) — to the extent that it was possible to find ‘tainted’ coins being used in each platform.

One can only hope that the distant future of Bitcoin will have forgotten the days when the landscape was so littered with known scammers, thieves, and liars as it is now. This is not meant to condemn Zhou Tong while still lacking sufficient proof, but as time goes on, it will become more evidence who was involved where. With any luck, such people will be weeded out over time and people will have a range of choices that will not burn them. Such an ecosystem would be much more viable than one that experiences a yearly buffet of large-scale scam artistry.

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