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Digital Currency Platform PayBase Accused of Absconding with Customers’ Money

One Reddit user said it’s gone “full blown Mt. Gox.”
March 23, 2015, 5:32pm

​Another cryptocurrency heist may be underway.

Digital exchange platform PayBase is being accused of scamming its customers. For about a week, users have reported the website, which functions as a wallet and an exchange for Paycoin, an alternative digital currency that launched in December​ 2014, has stopped withdrawals.

A Reddit user posted in subreddit r/Bitcoin on Sunday that the site "has gone full blown Mt. Gox on everyone," referring to the implosion of the world's first Bitcoin exchange in February 2014 that resulted the disappearance of around 750,000 of customers' bitcoins.

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"Withdrawals have been stopped for 7 days, GAW refuses to answer why and when they will resume," the post said, referring to PayBase's parent company, Bitcoin mining startup GAW Miners. "[Head of PayBase] Josh Garza refuses to answer questions, support threads get closed on hash talk, and if you tweet him, he will block your account. I can't withdraw bitcoins and they've been stuck on PayBase for a week."

Other Tw​itter users seem​ to be having tro​uble with withdrawals as well. Garza tweeted in the company's de​fense, saying "withdraws have already been going out."

"We have thousands of users, there will always be people complaining about withdraws. Last week some could, some couldn't not. Depends on the amount, history of the user and other factors," Garza wrote in an email.

For many, the site's latest problems were not unexpected, given its track record. PayBase and and GAW have frequently come under fire for questionable business practices and alle​ged fraud.

"How could this possibly surprise anyone?" one Reddit user replied to the original post.

"Paybase is just another Gox. so many people saw this coming yet people still fell victim," one Twitt​er user said.

Garza said these claims were false, and that slow withdrawal times for some users is due to increased security measures employed by the site. "We have had a lot of attempts to hack our systems lately and have put additional checks on withdraws, this prevents hacker from making off with people's money but takes longer," he said in an email.

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From currency's launch, Garza promoted it aggressively, advertising it as bet​ter than Bitcoin. But it didn't quite live up to the hype. Garza's claims of being in talks with major companies like Amazon to adopt Paycoin were den​ied by the companies in question.

Emails leaked from ​GAW Miners showed Garza intentionally over-sold the viability of Paycoin to his customers. In January, many in the Bitcoin community lobbied to have Garza bann​ed from the North American Bitcoin Conference in Miami, saying his scams would​ damage the credibility of the Bitcoin community as a whole.

While the site may be down due to technical issues, the excuse Mt. Gox first offered before admitting everyone's money disappeared, many are calling it a scam. Garza has yet to comment officially, but another cryptocurr​ency obituary may be on the horizon.

Update 3/23: This story has been updated to include emailed comments from PayBase's Josh Garza.

Update 3/27: Paybase ​released a statement this afternoon saying that withdrawals were delayed because of new security measures and that despite PayBase having previously been hacked, customer funds have not been lost, as Garza previously stated.