Computer software engineer Mike Caldwell created these physical representations of Bitcoins, but in truth the currency exists only in the digital realm. AP Photo

Bitcoin is again drawing scrutiny following an apparent theft of $387 million in client funds from a Hong Kong exchange that trades in the virtual currency.

Hong Kong police are reportedly investigating the disappearance of the money at MyCoin, which allowed users to buy and sell Bitcoin. The company appears to have suspended its service. Calls to MyCoin could not be connected, while calls to its customer service line were not answered, according to Reuters.

In wake of the incident, Hong Kong's central bank cautioned consumers against investing in virtual currencies.

"Authorities are fumbling around trying to regulate these things," said Steve H. Hanke, a professor of applied economics at The Johns Hopkins University and a senior fellow at the Cato Institute. "Hong Kong has a very good, regulated banking system. It does not want the authorities in Beijing coming down on them hard because something happened in some Bitcoin exchange."

Play Video

Erik Finman, a 15-year-old from northern Idaho, founded an online education program that links students with instructors around the world. Michel...

But the latest cloud over Bitcoin, and the largest since the 2014 bankruptcy of Tokyo-based Mt. Gox exchange, has less to do with the pros and cons of using or investing in virtual currencies and more to do with an old-fashioned scam.

"Reports say this wasn't a traditional exchange that was hacked, like Mt. Gox, but instead a business that provided some sort of contract that promised you a return, and some are surmising MyCoin was really running a Ponzi scheme based on Bitcoins," said Reuben Grinberg, an attorney at Davis Polk & Wardwell who started writing about the digital currency in law school.

"Oftentimes with new technology, where regulators haven't clamped down yet, scammers or people with bad intentions come in and start harming investors," said Grinberg, who cited as example the U.S. Securities and Exchange Commission action last year against Trendon Shavers and Bitcoin Savings and Trust, or BSCST, the online entity he created.

Original post:

Bitcoin firm goes dark, and funds are missing