Cryptocurrency exchange swamped by 'madness' of cybercash craze
The founder of a Vancouver cryptocurrency exchange says the company's staff are scrambling under an avalanche of clients, overwhelmed by sheer numbers of people eager to buy surging cybercash.
"It was just madness," said Michael Gokturk, co-founder of the Einstein Exchange.
His company is a new cryptocurrency trading firm that people use to buy digital currencies, bits of computer code assigned a monetary value.
There are 21 Vancouver-based workers at the firm, serving a clientele that went from just 66 clients last September to 30,401. This happened as the most popular cybercurrency, bitcoin, hit meteoric prices of more than $24,000 per coin.
"Word of mouth spread like wildfire," Gokturk said.
But that surge of customers overwhelmed the small staff who were trying to verify customer identities and deal with website problems.
The Einstein Exchange ended up at the centre of a storm of online criticism after a myriad of launch problems. Some described the easy-to-use site that allows credit cards as a "scam."
Frustrations grew after some clients waited up to three weeks for staff to respond.
Some feared they'd lost their money when the firm cut off new client registrations on Jan. 2.
But Gokturk said he's working on the customer service issues and assured that no one will be out money. He's hired extra support staff to cut down wait times for service.
"No one will lose their money here," said Gokturk who said he is reaching out to every client to return money or make up any losses.
Gokturk said his team are the "good guys," not a scam.
He said he's trying to create a portal to make it easy for average Canadians to get a bite of bitcoin.
But customers were furious, saying they lost opportunities to buy certain currencies before prices rose because their money was stuck while their accounts were verified.
Gokturk said the company tried to verify accounts within 24 hours, but that became impossible.
In the midst of the client storm, he said Einstein was attacked by hackers, fraudsters and thieves, which forced the company to tighten security.
"I'm heartbroken this happened," he said as he paced past banks of screens with rainbow-coloured profit graphs at the company's downtown Vancouver office.
He said he regrets not freezing registration earlier.
"I understand why people are angry. I would be too," he said.
He increased staff to 51 people working in Vancouver and Montreal, and he said they've almost solved the problems.
Delays cause fears
Meanwhile, a group of former clients is proposing a class-action lawsuit against the investment firm, but experts warn that regulatory bodies may have no say over cryptocurrency transactions.
It depends whether each currency is defined as a legal security.
The B.C. Securities Commission (BCSC) is interested in any complaints, but makes no promises about taking action.
"It may or may not fall within our regulatory jurisdiction," said Alison Walker, BCSC media spokesperson.
Financial experts have long warned this sector is a gamble.
"If you're going to invest in new or high-risk things, don't put in money that you're not prepared to lose," said Cristie Ford of the University of British Columbia's Centre for Business Law.
'I don't hate Michael'
Frank Hoffman of Las Vegas said he won't use the Einstein Exchange again.
In December, Hoffman used his credit card to buy $1,000 worth of a currency called Ripple or XRP, which is currently surging in price.
But then his account froze.
His money was refunded this week, and he even made a small profit, but he is convinced he lost an opportunity to make more money because of processing delays.
"I lost potentially $10,000 and my friend lost potentially $25,000. But I'm a newbie. Perhaps I'm naive," he said.
"I don't hate Michael," he said referring to Einstein's founder.
Hoffman was one of a half a dozen people CBC contacted who reported problems. Most did not want to be quoted.
Cynthia Pace said this situation erodes trust in the cryptocurrency marketplace.
The Vancouver investor deposited about $1,200 and said she eventually made a profit.
She visited the exchange, which is open to clients, and was impressed by Gokturk's "smooth and reassuring" manner.
He shared his personal cell phone number with her.
But she said nobody seemed to be able to get her account to work.
"It was a bit chaotic," said Pace, who owns a company that counsels corporations on etiquette.
But she said after multiple attempts to get her log-in issues fixed so that she could deposit $10,000, she was suddenly encouraged to take her account elsewhere and to stop harassing staff.
'Crashed and burned'
She believes she missed out on making even more profit because of poor customer support and an unreliable website.
"It's like sending a paper airplane into a big hurricane. Of course they crashed and burned. As they were crashing, they kept taking more and more customers and more and more money on board," said Pace.
Her account was closed after speaking to CBC, she said.
But other clients lauded the company for fast service.
Montreal investor David Fenelus and others posted positive reviews, saying "I am happy and will continue giving Einstein my business."
For his part, Gokturk said he has lost his voice apologizing to clients.
He hopes to clear the backlog, reimburse any losses and rebuild trust.
"I would be pissed too. This is money. Whether it's a dollar or $10 million. It's their hard-earned money and they're absolutely right."