Bitget

Bitget seized more than $200,00 of my cash. Now its executives won’t tell me what they're doing with it, or if they intend to return it.

The blockchain industry has been revolutionary, to say the least. In the last three years, the crypto market has affected and changed lives positively — mine included. And this is why I am a massive advocate of cryptocurrencies and their power to give anyone financial freedom. Perhaps that is why MicroStrategy CEO Michael Saylor’s quote calling Bitcoin (BTC) “digital gold” resonates with me. 

As an industry still in its nascent stages, I have had my fair share of unfortunate events happen to me, but none as bad as what I’ve experienced with Bitget. Allow me to share the details of the ordeal in which Bitget seized more than $200,000 of my money, directly caused more than $2.5 million in losses, and — by my estimate — more than $10 million in reputational damage.

I have lost:

$16M+ due to Bitget
$4M+ staked on UST / Luna
$2M held in FTX
$1M+ held in Freeway

And much more in other scams.

Here are my 7 learnings that can save you millions of dollars:

[ Instant Bookmark ]

— EvanLuthra.eth (@EvanLuthra) August 15, 2023

One might think an exchange as large as Bitget would be all about transparency. However, I’ve realized that is unfortunately not the case. Crypto exchanges have seen their downfall because of a lack of transparency. FTX is a rather painful example, and it is still fresh in our memories.

According to reports, FTX CEO Sam Bankman-Fried moved up to $10 billion in FTX customer funds (without the knowledge or approval of said customers) to his trading company Alameda Research, whose assets were held primarily in the exchange’s native token, FTX Token (FTT). Binance CEO Changpeng Zhao’s announcement that Binance was selling its stake in FTT created panic among customers, which resulted in a bank run and, ultimately, the bankruptcy of the FTX Group.

My experience with Bitget

I’ve been a user of Bitget for a while now. But in the first quarter of this year, Bitget prevented me from withdrawing my tokens — despite being in full compliance with Know Your Customer protocols.

The issue arose in connection with my role in advising a project, ReelStar, beginning in October 2022.

ReelStar’s announcement about my advisory role was very public. It’s safe to say it was public knowledge. In the same fashion, it was public knowledge that I was going to be paid with the project’s tokens. Unlike what most people — including Bitget executives — might think, I don’t get paid in dollars to promote projects I’m unfamiliar with, unlike celebrities including the Kim Kardashians or Floyd Mayweathers of the world.

Related: It’s time for the SEC to settle with Coinbase and Ripple

As such, I only make money when a project’s token grows in value. This is pretty standard, as I am an adviser — not an influencer. I get paid in tokens because I bring more than just influence to the table. I connect projects with partners, bring capital, and ultimately, boost credibility.

On March 23, it was time for ReelStar’s native token, Reel Token (REELT), to be listed on exchanges. Bitget charged money for this right — six figures, in dollars, just so you have some idea of what happens behind the scenes.

I had been an adviser on the project for months at that point and was promised compensation in the form of REELT. Having not earned anything for the work I had put in, I sold less than 3% of my personal REELT holdings — less than .03% of the total REELT supply — with the blessings of ReelStar’s founders, Navdeep Sharma and Nick Bahl.

But my funds — including the Bitcoin and altcoins I already had on the exchange before REELT — were blocked without explanation. I and my attorney, Charles Slamowitz, are now filing suit through my to determine whether Bitget stole my funds, as Bitget is refusing to inform me.

Related: An ETF will bring a revolution for Bitcoin and other cryptocurrencies

At this time, I have no idea where my funds are. As far as I know, Bitget may be using them to make its own investments — and may be planning to keep my money permanently.

At first, I thought there was an error and that I could clarify things with Bitget — but I soon realized that it had not made a mistake.

Is Bitget the next FTX?

I lost more than $2 million to the FTX debacle and was invited by Fox, CNBC and many others to talk about what I thought went wrong. Now, Bitget is acting in a manner that is arguably reminiscent of FTX before its fall. It would be wise for users to consider what that means. I’ve been burned already, and I think I’m in a position to point out the questions surrounding this exchange.

I also find it odd that a company like Bitget would hire a former host for a state-owned Chinese television network — Gracy Chen, who worked for Phoenix Television — as a key public face for its business. Outside of Chen, we know little about the exchange’s executives. Who are Bitget’s actual owners? Who is on its management team? Who’s controlling the user funds in Bitget’s custody? Few are asking these questions, and the exchange is refusing to provide many answers.

And in a continuation of its strange hiring practices, it has brought on non-expert celebrities, including actor Adam DeVine and Lionel Messi, to market its services. This is a dangerous precedent originally set by FTX, and it is worrying. Using celebrities to market cryptocurrency products to unsuspecting members of the public — especially millennials and Gen Z — arguably isn’t ideal for the market. FTX fell, in part, because it relied on influencers and marketing to win over casual users while failing to prioritize hard work on the back end.

In another parallel with FTX and its reliance on its own FTT token, a substantial portion of Bitget’s reserves are held in its native token, Bitget Token (BGB), rendering the exchange vulnerable if the price of its token falls.

Bitget sabotaging token listings?

Recently, GPT Guru accused Bitget of sabotaging its GPTG token listing on the exchange. According to GPT Guru, GPTG’s listing price was set at $0.0035, but Bitget actually listed it at $0.084 — 24x higher. This led to a huge red candle, which ruined the launch.

“Upon inquiring more about how it happened, we figured out that it was Bitget’s own team who was responsible for [the] messed up $GPTG listing,” Guru said. “Not only that, the Bitget team itself admitted to GPT Guru’s CEO about an insider job from within the Bitget team.”

Bitget initially agreed to compensate users who had lost funds, according to GPT Guru, but has since deleted its messages and ceased communication with the GPT Guru team. This led GPT Guru to threaten legal action against Bitget — but not everyone can afford expensive lawyers.

These actions are unfair and reflect poorly on Bitget as a crypto exchange, which enjoys control over its users’ funds. What’s to stop it from engaging in the same questionable — arguably unethical — behavior in the future? These issues should concern us all. At a time of market uncertainty and looming regulatory action across the globe, we deserve more transparency from the exchanges we use — and clear guarantees of the behavior we can expect.

The central question for crypto exchanges is what legal duties they specifically owe to their users — if any. My lawsuit is going to find out.

This column is a counterpoint to Bitget's perspective: Bitget acted ethically on crypto influencer’s account

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitget managing director Gracy Chen argues her exchange had a duty to act when a crypto influencer began selling his holdings in a project he was promoting.

Love or hate them, influencers are as inseparable from crypto as blockchain itself. While it’s hard to imagine a crypto space without social media influencers, they sometimes act unethically by promoting dubious tokens and profiteering at the expense of ordinary investors. Such practices are a matter of concern — not only to the crypto community members who trust them but also to regulators.

While the United States Securities and Exchange Commission and Federal Trade Commission have fined celebrities, including Kim Kardashian, for failing to disclose their compensation for endorsing certain cryptocurrencies, most cases go unpunished. This lack of oversight deleteriously affects ordinary users.

Influencers for hire

Consumer trust in influencers has reached unprecedented levels. One survey by Fool indicated that 91% of Gen Z respondents consider social media their primary source of investing information. Followers copy bloggers, buy what they recommend and follow their financial advice. This widespread practice is acceptable as long as it is accompanied by a transparent endorsement that highlights the influencer’s financial interest in a product.

Related: Bitget and crypto influencer embroiled in legal saga after Reel Star token listing fiasco

In February, the SEC charged former NBA player Paul Pierce with promoting low-cap tokens to his followers without proper disclosure, resulting in financial losses for the public, with Pierce ultimately settling and paying $1.4 million. Similar investigations accused boxer Floyd Mayweather Jr. and music producer DJ Khaled of failing to disclose promotional payments from initial coin offerings, with the latter enthusiastically endorsing one of the projects as a “game changer.” In 2017, Paris Hilton endorsed the alleged scam project LydianCoin without a proper disclaimer, and even used the counter hashtag #ThisIsNotAnAd. Yet another substantial fine was the $1.26 million penalty imposed on Kim Kardashian, whom the SEC accused of failing to transparently reveal her financial stake when she endorsed the EthereumMax (EMAX) token.

Since Kim Kardashian shilled EthereumMax in June 2021, its value has plummeted by 95%. According to the SEC, she pocketed a $250,000 fee for her endorsement.

Our crackdown on a ReelStar influencer

There’s a clear pattern involving influencers shilling projects while failing to be transparent about their stake in them. ReelStar is another case in point. One of its endorsers, a cryptocurrency influencer, neglected to transparently communicate with his followers that he had received a substantial commission of 7.5 million tokens from the project he later endorsed. Once it was listed on exchanges — including Bitget — he commenced selling REELT tokens after stating that he was bullish on the project and expected to see it go “to the moon.” This coincided with a 60% plummet in the token’s value — and many ordinary users left holding the costs. Today, the asset rests approximately 95% below its initial price.

We are delighted to have @EvanLuthra on board as we innovate in the #Web3 space and build the next generation "everything" app!

Just wait and see what we have coming! You wont want to miss this! #ReelToken #ReelTokenGlobal #ReelT #ReelStar #ReelPay #ReelPayGlobal pic.twitter.com/IjQpnrL1gR

— ReelToken (@Reel_Token) December 4, 2022

The episode, while by no means isolated, has provided an invaluable lesson for the industry that can be summarized as Know Your Influencer. Should a project or an exchange become aware of dubious schemes, they should swerve to prevent history from repeating.

As a result of this ordeal, Bitget covered more than $540,000 in losses that 583 of its users suffered from REELT’s declining price. The ReelStar adviser, on the other hand, failed to accept any accountability, instead shifting responsibility to other parties, pretending to be a victim and continuing to mislead his community.

It’s important to clarify what constitutes ethical and unethical behavior. If an influencer owns a large amount of a new cryptocurrency, participates in its promotion, and sells it off at the first opportunity, without waiting for project development or a price increase, are they acting honestly? No. If other retail investors are aware of this, will they buy this cryptocurrency? Most likely not.

Insider trading and market manipulation are by no means isolated to social media influencers: Company executives, advisers and partners can be just as guilty. Elon Musk’s tweets are the most famous example of how a few words can spike or plummet a token. His long-standing support of Dogecoin (DOGE) coincided with a rise in its price of 36,000% over two years before it crashed. Celebrity-driven pump-and-dumps aren’t just a question of fiduciary responsibility but also a matter of ethics — there’s what’s legally wrong and what’s morally wrong.

Ethics on the crypto playground

People trade on Bitget to buy project tokens whose tech, team and roadmap resonate. Similarly, projects seek our platform to secure the impetus for their product’s further development and to deepen available liquidity. However, if their budget is whittled away on influencers whose primary goal is personal enrichment, the funding raised from even the most successful of token sales will swiftly dissipate.

Related: Don’t be surprised if AI tries to sabotage your crypto

Bitget is relied upon by 20 million users, each of whom deserves unwavering respect, transparency and equal access to opportunities coupled with high-quality service. We uphold a policy that places no single user’s interests above those of others. For this reason, we advocate establishing clear disclosure guidelines, improving transparency and educating investors on the risks of crypto trading, as well as the upsides.

The crypto community as a whole needs to reflect on its values and responsibilities. While hype-driven pumps may benefit a select few in the short term, they undermine credibility and trust in the long run. The path forward should involve maximizing benefits for regular users, not just speculators. Ethical leadership is required to reinforce the industry’s inclusivity while granting it legitimacy in the wider financial sphere.

Let’s do better

Industry players, together with social media platforms, owe a duty of care to the regular public, who constitute 99.9% of their user base. It is imperative that they guide influencers, reminding them of their responsibilities to the community and the need to comply with the law. This can be achieved through the enactment of dedicated influencer legislation, the issuance of clearer guidelines and codes of conduct, and the deployment of better monitoring tools.

Trading platforms play a pivotal role in liaising with regulators, identifying suspicious market activity, and safeguarding users from bad actors. Token issuers, meanwhile, should enhance their due diligence processes for influencers, advisers and partners who might misuse their positions for personal gain. Influencers should also seek robust indemnity provisions from brands to cover potential penalties and legal expenses they might incur.

In instances where misconduct has occurred and users have suffered financial losses, clear mechanisms are needed to initiate asset recovery from the guilty parties. Finally, prospective buyers should do their own research and evaluate potential investments rather than relying on paid endorsements from social media figures. Or, as they say in crypto, DYOR.

This column is a counterpoint to Evan Luthra's perspective: Is this exchange the next FTX?

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.