The Neo & Bee Bank-Latest Bitcoin Fraud Story

If you follow the latest news on Bitcoin, you have probably heard about the Neo & Bee bank, or it’s CEO, in a few recent articles. The biggest story that comes to mind is ‘Bitcoin CEO on the Run’ which really drew attention to the potential fraudulent activity of the CEO and the company as a whole.

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Photo: Atana / Flickr

But it’s a pretty complex situation. There’s no clear cut answer or statement at the moment. As the company received a lot of publicly invested funds, it’s hard to tell whether this money is actually safe or if it’s already a tax write-off. At the same time, there are possibly bigger concerns for share traders that ended up getting burnt and holding a bag full of worthless shares – of course, these shares would jump back up a bit if the issue became transparent and got fixed quickly.

So there are many questions to answer. The quality of the answers available may not be the greatest, but it’s all people have to go on given the limited amount of disclosure at this time.

Here are some questions and answers that should help with understanding what happened and how the rest of the story played out.

How Neo & Bee Obtained People’s Money

As someone that’s not affected by this potential fraud story, you may not be aware of how they got their hands on other’s money in the first place. The primary source of these funds is through company investments – bitcoin traders and investors utilized Havelock Investments, a bitcoin stock exchange, in order to purchase shares of the Neo & Bee company.

This went on for a long time as there has been anticipation for this bank’s opening since last year. In midst of insolvency claims, the exchange’s website decided to halt trading – but not before the share values plummeted.

How the Neo & Bee CEO Lost People’s Money

It’s hard to justify the line between stupidity and theft. It’s something that many have been debating on the whole MtGox scandal. With the Neo & Bee situation, it really comes down to whether the CEO is telling the truth or not. Even if everything is true, one would have to think that there are at least some shady and unethical practices going on – some of which could easily be considered illegal and fraudulent.

The most important part of the story of how the money was lost comes from how the CEO managed these funds. The CEO claims that 1,420 bitcoins (investment funds) were held in BitFunder and WeExchange, but lost when the two exchanges shut down last year. The CEO claimed that he accepted liability and covered these losses. He also went on to claim that a ‘UKYO’ was indebted to him for 260 bitcoins. Further, he mentioned that he had lost 369.8 bitcoins of his own in MtGox, which he intended to use to clear the debt with creditors and to continue on with the venture while seeking additional funding. You can read more about the entire story and statements from the CEO here.

How Neo & Bee Bank committed Fraud

The CEO’s stupidity seems to be what is to blame for all the fraud claims. The company became completely devalued and essentially insolvent as a result of the CEO mismanaging the company’s holdings. From this, many lost a lot of money through holding company shares or buying during the downpour. It didn’t just happen on the Havelock exchange either. LMB-Holdings is another bitcoin stock exchange that traded Neo & Bee shares, but it gets worse…

Rumor has it that Neo himself was selling off shares through OTC, which is essentially direct transactions between individuals. This takes the whole theft a step further as the CEO’s stupidity may be to blame, but attempting to turn a profit when well aware of the fact that your investors lost money, well that’s fraud.

Many had concerns about Neo & Bee dating back to December of 2013. A few big observations by the bitcoin community included a registered address that was for a residential property and a lack of big funding sources in the prospectus. Many also felt that the prospectus was more of a ‘words you want to hear’ than a thoroughly planned and executed business strategy.

Where Does the Story Go From Here?

Well, the CEO just spoke out on the allegations claiming he ran away due to an arrest warrant being placed on him in Cyprus. All that can be taken from this statement is that he has been alluding Cyprus, regardless of whatever reasons he gives, because he wants to clear up the police matters first. He implies at the end of his statement that he will put his full focus on resolving the Neo & Bee crisis once an effective return to Cyprus is arranged between himself and the Cypriot police.

What was once one of the most promising business plans in the Bitcoin community is now a complete blow to the biggest believers of the virtual currency. It’s becoming very tough for Bitcoin investors as everywhere they turn, there’s a hacking, theft, or something fraudulent or ‘accidental’ going on. All that one can hope if they are feeling the rattles of the Neo & Bee story is a possible solution.

Havelock Investments re-activated trading for Neo & Bee stocks earlier this month and included a ‘Q’ symbol (common for companies filing bankruptcy), the prospects of seeing any money back is starting to look dim.