The founder is suspected of running away, and the Turkish crypto exchange Thodex is accused of defrauding hundreds of millions of dollars

This article is from Bloomberg, original author: Taylan Bilgic & Firat Kozok

Translator: Odaily Planet Daily Nian Yin Sitang

Unable to recover their investments, users of Turkish cryptocurrency exchange Thodex have filed a lawsuit alleging fraud that, according to the plaintiffs’ lawyers, could amount to hundreds of millions of dollars. Meanwhile, the exchange’s head has been unable to be contacted and is said to have fled the country.

“We have filed a legal case on Wednesday,” Oguz Evren Kilic, who represents an undetermined number of Thodex users, told Reuters by phone on Thursday. He said the “irrecoverable” assets could be worth hundreds of millions of dollars, given that Thodex has about 390,000 active users. A prosecutor in Istanbul has opened an investigation, according to Turkey’s state news agency Anadolu Agency.

Kilic said Faruk Fatih Ozer, Thodex's chief executive and founder, fled the country on a commercial flight from Istanbul on Wednesday evening. Ozer did not answer multiple calls to him. Demiroren News Agency said he had traveled to Albania and published a photo purportedly of Ozer at the airport.

As authorities and customers try to make sense of the chain of events and the amounts of money involved, officials are urging fast regulation of the cryptocurrency market. As cryptocurrency prices soar, scams linked to crypto platforms have emerged around the world, and speculation that authorities will step up oversight.

Cemil Ertem, a senior economic adviser to Turkish President Recep Tayyip Erdogan, told Bloomberg on Thursday that the Turkish government should act "as soon as possible." "Pyramid schemes are emerging in the (crypto) space. Turkey will undoubtedly implement a regulation that is consistent with the country's economic situation and will also follow global developments."

Dogecoin Marketing

Thodex announced a marketing campaign in mid-March to boost its user base, claiming that it would distribute millions of Dogecoins to new registrants. Its official website shows that 4 million Dogecoins have been distributed, but many participants complained on social media that they never received these Dogecoins.

Sudden suspension of trading sparks panic

Thodex said in a statement on its website that the exchange suspended trading due to a "cooperation offer" but did not elaborate. According to the statement, users do not need to worry about their funds while the exchange completes the equity sale, and trading will be suspended for "approximately 4-5 business days."

Crypto industry turmoil

According to a recent statement from the Turkish Central Bank, Bitcoin and other cryptocurrencies have been banned as a form of payment for goods and services. The Turkish Central Bank said in the statement that transactions involving cryptocurrencies could cause "irreparable" damage and significant risks. The new regulations will take effect on April 30.

The Central Bank of Turkey (CBRT) said that the ban on the direct or indirect use of cryptocurrencies and other such digital assets is necessary because these assets are “neither subject to any regulatory and supervisory mechanisms nor to a central regulatory body,” among other security risks.

Turkey accounts for a large share of cryptocurrency use in the Middle East. In the Global Crypto Adoption Index of blockchain analysis company Chainalysis, Turkey ranks 29th out of 154 countries and first in the Middle East. On Turkey's BTCTurk exchange, the most common transaction is lira for Bitcoin.

Chainalysis data shows that from the beginning of February to March 24, Turkey's cryptocurrency trading volume reached 218 billion liras (about 27 billion US dollars), compared with just over 7 billion liras in the same period last year.