Turkish authorities have detained more than 60 people and issued an international search warrant for the chief executive of a local cryptocurrency exchange in connection with allegations of fraud.
Prosecutors have opened a probe into the Istanbul-based Thodex cryptocurrency platform after news reports emerged that a suspect, identified by the initials FFO, “escaped overseas with $2bn” in investors’ money, according to a statement from the Istanbul governor’s office.
Prosecutors on Friday issued a red notice to Interpol for the arrest of Thodex CEO Faruk Fatih Ozer, who is “wanted for prosecution”, the national police directorate said on its website.
The value of Bitcoin, the most traded cryptocurrency by volume, has fallen by more than 20 per cent against the dollar since it hit a record high on April 13 of more than $60,000 per token. Bitcoin has seen a sharp sell-off triggered by concerns about stricter regulation of cryptocurrencies, including in Turkey, and higher capital gains taxes in the US.
On Friday, Bitcoin sank to $47,705 from its peak of $63,000 just 10 days earlier, illustrating the highly volatile nature of cryptocurrency markets. Despite the tumble, bitcoin is still up 55 per cent since the start of the year and has gained 560 per cent during the past 12 months — a blistering rally that rekindled interest in cryptocurrencies.
Avi Felman, head trader and portfolio manager at cryptocurrency specialist BlockTower Capital said the announcement of US president Joe Biden’s new tax proposals on Thursday had spooked Western investors into selling their bitcoin holdings “aggressively”. The US administration said it was considering sharply raising tax on capital gains for the richest Americans, triggering a sell-off in equity markets as well as in bitcoin.
“There were clear signs of panic selling [but] there is a strong underlying cash bid for bitcoin,” Felman said.
In Turkey, Thodex, which claims to have 700,000 users, is just one of the crypto exchanges that has enjoyed a boom in recent years as citizens have sought ways to protect their savings against double-digit inflation and declines in the lira, which has lost more than 35 per cent of its value against the dollar since the start of 2019.
Turkey has the largest volume of cryptocurrency transactions in the Middle East and it ranks 29th worldwide, according to a report by blockchain analysis company Chainalysis. Turkey’s crypto trading volumes were about $27bn between early February and late March, Reuters has reported, citing data from Chainalysis.
Demand for cryptocurrencies in Turkey has shot up since the lira came under renewed pressure since mid-March, propelling the value of bitcoin against the Turkish currency to record highs. New regulations announced by the central bank on April 16 ban the use of cryptocurrencies to purchase goods in Turkey, though owning the assets for investment is still allowed.
Police detained 62 people in the pre-dawn operations on Friday and are looking for another 16, the state-run Anatolia news agency said. The suspects are wanted after they “were determined to be in contact with the company”, it said. Police have also seized digital evidence and documents after raiding Thodex’s Istanbul offices this week.
The governorate said a suspect had flown to Tirana, the capital of Albania, on Wednesday, and that accounts at the Thodex cryptocurrency exchange were inaccessible. Turkey’s interior minister phoned his Albanian counterpart to request Ozer’s arrest, police said.
Ozer said in a statement on the company’s Twitter account that the allegations against his company were “baseless”. He said he had travelled overseas to meet potential investors, and would return to Turkey to co-operate with investigators in a matter of days.
Thodex had temporarily halted trading on its platform on Wednesday while it determined the source of recent “abnormal volatility” and would repay the small number of clients who were affected, he said.