Update: January 17, 2024 – New Taipei Criminal Investigation Bureau Urges Victims to Fill Out Forms to Assist in Investigation
ACE, a popular local cryptocurrency exchange in Taiwan, was recently involved in a fraud case where the former CEO and his accomplices used social media to promote worthless cryptocurrencies like MOCT, BNAT, MOCT, SOLA, QQQ, and others, defrauding victims of over 1 billion New Taiwan Dollars within three years.
As ACE has a significant influence and user base in Taiwan, the New Taipei Criminal Investigation Bureau recently took to Facebook to encourage victims who have fallen prey to similar scams involving “NFTC,” “BNAT,” “MOCT,” “SOLA,” “QQQ,” or other worthless cryptocurrencies to fill out a form to assist in the investigation conducted by the prosecution.
The New Taipei Criminal Investigation Bureau also reminded victims to gather relevant documents such as investment contracts, conversation records, and transfer information after filling out the form, and to go to the nearest police station to complete the report and obtain a case certificate.
Update: January 10, 2024 – Financial Supervisory Commission Demands Explanation from ACE Exchange
ACE, one of the three major cryptocurrency exchanges in Taiwan, recently became embroiled in a fraud case where the former CEO, Pan Yizhang, and his accomplices promoted “worthless cryptocurrencies” to users, defrauding them of over 1 billion New Taiwan Dollars within three years.
In response, Shang Guangqi, the Chief Secretary of the Financial Supervisory Commission, stated that the authorities currently have concrete evidence of the company’s illegal activities. On January 5, a letter was sent to ACE Exchange requesting an explanation. The Financial Supervisory Commission will handle the matter in accordance with the Anti-Money Laundering Act, with the possibility of invalidating its legal status and potentially initiating a special investigation.
Original Article from January 5, 2024
ACE Exchange Involved in Fraud Case! Defrauded Over 1 Billion in Three Years
The cryptocurrency scene in Taiwan has been turbulent at the start of 2024. ACE, one of the top three cryptocurrency exchanges in Taiwan, was exposed for fraud on the evening of January 4. It was investigated by the New Taipei City Criminal Investigation Division, and 100 million New Taiwan Dollars in cash was seized from the home of David Pan Yizhang, the former CEO of ACE.
Pan, along with 14 partners, including Lin Genghong, have been detained by the Taipei District Prosecutors Office on charges of fraud, money laundering, and violations of the Banking Act. According to the Liberty Times, over the past three years, Lin and Pan deceived hundreds of investors into investing in worthless cryptocurrencies through false advertisements. The police estimate that the total amount defrauded by the two individuals within three years could exceed 1 billion New Taiwan Dollars.
Pan Yizhang, one of the co-founders of ACE Exchange, previously served as the Chief Operating Officer of the Start-up Enterprise Service Team at KPMG, where he gained extensive experience in entrepreneurial counseling, cross-domain resource integration, and financial planning.
Pan Yizhang, one of the co-founders of ACE Exchange, previously served as the Chief Operating Officer of the Start-up Enterprise Service Team at KPMG, making him influential in the Taiwanese cryptocurrency scene.
In 2018, he established the Asia Blockchain Accelerator (ABA) to assist businesses and exchanges in their development. It later evolved into a group comprising an accelerator, an exchange, and a marketing company.
Pan Yizhang’s alleged involvement in fraud, now that he has been detained, has sparked discussions within the cryptocurrency community.
How did they deceive investors by using a legitimate exchange for their fraudulent activities?
This fraud was carried out by two individuals. Lin Genghong was responsible for promoting investment advertisements on platforms like Instagram, Facebook, and X, while simultaneously deceiving users into investing in cryptocurrencies like MOCT, NFTC, BNAT, and claiming that these tokens would be listed on reputable domestic and international exchanges in the future. On the other hand, Pan Yizhang used the reputable and compliant ACE Exchange to list these cryptocurrencies.
Taking MOCT (Magic Token Coin), which was launched in 2019, as an example, the official website mentioned a collaboration with a well-known Taiwanese company, ACE, for blockchain technology. The introduction on ACE Exchange’s official website also emphasized that the token was incubated by ACE Exchange, thereby enhancing its credibility.
The New Taipei City Criminal Investigation Division pointed out that the two individuals carried out their fraud by creating an information gap, misleading investors into believing that these cryptocurrencies were the latest technological advancements with the potential for significant appreciation and liquidity. However, investors ended up purchasing “worthless coins” and “air coins” that held no real value. By the time investors realized this, the value had already plummeted, and they were unable to liquidate their investments.
The police conducted searches at 15 locations in Taipei, New Taipei, Taichung, including Lin Genghong’s residence and ACE Exchange’s company premises. They seized a significant amount of cash and cryptocurrencies from Lin Genghong’s residence, totaling over 200 million New Taiwan Dollars in illegal profits.
The police estimate that the total amount defrauded by the two individuals within three years could exceed 1 billion New Taiwan Dollars.
Company clarification: Project parties involved in illegal activities, not related to the exchange
WEB3+ immediately contacted ACE Exchange for a statement. The company clarified that the recent fraud incident was related to “individual project parties having engaged in illegal activities in 2019” and was not related to the exchange itself. Both ACE employees and the exchange itself are fully cooperating with the authorities as witnesses, and it was emphasized that some media reports suggesting the involvement of ACE Exchange employees were not true. The company has already requested a correction from the media.
However, ACE Exchange failed to exercise strict control, allowing problematic cryptocurrencies to be listed on the exchange. Additionally, certain cryptocurrencies remained listed for several years without any issues being detected. ACE may not be completely free from responsibility in this fraud controversy.
What does the Cryptocurrency Association’s preparatory group say?
ACE, as one of the three major cryptocurrency exchanges, has sparked discussions within the community and has caused many users to lose confidence in the Taiwanese cryptocurrency scene. The members of the Cryptocurrency Association’s preparatory group held an emergency meeting on the evening of January 4 to discuss the involvement of members of the preparatory group in the fraud case.
According to the announcement from the Taiwan VASP Association Preparatory Group, the company responsible for ACE Exchange was changed to Wang Chenhuan, the managing partner of Jianye Law Firm, who holds 100% of the company’s shares, on December 14, 2023. The change has been registered with the relevant authorities.
As Pan Yizhang, the “former CEO” of ACE Exchange, is implicated in the case, ACE expressed its apologies for the impact this has had on the association. To maintain transparency and avoid controversy, ACE voluntarily withdrew from the preparatory group.
The preparatory group also stated that this incident highlights the importance of “pre-sale underwriting,” “initial exchange offerings (IEOs),” and “listing review mechanisms,” as well as the importance of business solicitation and content control in advertisements.
In addition to complying with the “Guiding Principles” issued by the Financial Supervisory Commission, the preparatory group will soon begin discussions on the formulation of “self-regulatory standards” after the official establishment of the association. These discussions will focus on pre-sale underwriting, IEOs, listing cryptocurrencies, and other detailed aspects to establish industry standards and prevent similar controversies from happening again.
ACE Exchange’s statement: Full cooperation with the investigation
In response to the former CEO’s involvement in the fraud case, ACE Exchange promptly issued a statement emphasizing its full cooperation with the investigation. Wang Chenhuan, the newly appointed CEO since 2023, who is also the managing partner of Jianye Law Firm, is committed to operating legally and compliantly, as well as protecting user asset security. The following is the full text of the statement:
First: User asset security is the top priority, with 100% New Taiwan Dollar trust and dual protection for cryptocurrency
ACE Exchange was founded in 2018 and registered in Taiwan. It was the first Taiwanese exchange to follow the AML-related regulations with the guidance of KPMG A-Hou Jianye. In 2021, ACE Exchange submitted a statement of compliance with the anti-money laundering regulations to the Financial Supervisory Commission. It also has dual insurance protection with “100% New Taiwan Dollar trust held by Cathay United Bank” and “CYBAVO cryptocurrency wallet system” through Nord Insurance Brokers to ensure the custody of customers’ cryptocurrency assets.
ACE Exchange also emphasized that Wang Chenhuan, the newly appointed CEO since September 2023, is also the managing partner of Jianye Law Firm. He is committed to operating legally and compliantly, with the top priority being the protection of user asset security.
Second: Regular review of listed cryptocurrency projects and market trading conditions to provide users with more diverse choices
ACE Exchange stated that it will continue to monitor the development and market trading conditions of all listed cryptocurrencies. In order to provide users with a good trading environment and service quality, ACE Exchange will regularly conduct market review processes and comprehensively evaluate the cryptocurrencies that have applied for listing in the past. Tokens that do not meet the criteria will be delisted, and popular tokens will be added to provide users with more diverse choices.
ACE Exchange also emphasized that if a project has engaged in private fundraising or sales activities outside of the ACE platform, users should exercise caution.
(Risk Reminder: The listing of cryptocurrencies has passed ACE’s review, but it does not mean there is no investment risk. Cryptocurrency assets are high-risk investments, and investors should choose targets carefully, read white papers and other public disclosures, and be aware of investment risks at all times.)
Third: Full cooperation with investigations if there are disputes or violations by project parties; immediate delisting to protect users until disputes are resolved
ACE Exchange will delist the MOCT/TWD trading pair on January 8 at 4:00 PM. After delisting, all orders will be automatically canceled, and it will not affect the deposit and withdrawal functions of the token.
ACE also stated that it will fully cooperate with investigations if there are disputes or violations by specific project parties. Currently, there have been no impacts on ACE’s operations. In the future, ACE will operate with caution, striving to maintain its position as one of the top three exchanges in the Taiwanese market.
Proofread by: Gao Jingyuan