It’s been just two weeks since the bitcoin ecosystem celebrated news of the first regulated United States bitcoin exchange, launched by Coinbase. Today, the industry is once again being reminded just how important this level of oversight and scrutiny can be. The South China Morning Post reports that Hong Kong’s MyCoin exchange has shut down, taking with it as much as $386 million of investor funds.

Unlike most prior bitcoin scandals – of which there are many – the funds in question are not client trading deposits, but rather a form of equity investments. MyCoin was selling what it described as bitcoin contracts, under which the company would give its “clients” a return of 90 bitcoin ($19,080) after just four months on an investment of just HK$400,000 ($51,560). The victims are everyday citizens who authorities now suspect were the unwitting participants in a ponzi scheme. The company previously claimed that it had raised at least HK$1 million ($128,900) from 3,000 clients. Authorities have yet to corroborate this astonishing sum.

The Post now reports investors were promised to see their money more than double in four months, causing many to mortgage their properties for additional funds to invest. Others report being offered prizes like cash or Mercedes cars for recruiting additional investors. Investors were prohibited from cashing out their investments unless they recruited additional clients. The company hosted fundraising events at luxury hotels across China throughout the last year.

The biggest victim is believe to have invested HK$50 million ($6,445,000). Clients reportedly don’t have any physical documentation backing up their investment, only trading contracts on the MyCoin’s erstwhile exchange.

One female victim with the surname Lau, who lost $1.3 million, tells the Post, “No one seems to know who is behind this. Everyone says they too are victims … but we were told by those at higher tiers [of the scheme] that we can get our money back if we find more new clients.”

Hong Kong authorities first became aware of the issue on Friday when approximately 30 victims of the apparent fraud petitioned local Legislative Council member, Leung Yiu-chung. The first hint of trouble for these clients came earlier this year when the company posted a notice at its office stating that it was closing for renovations. That was January 3. The company’s website no longer allows visitors to setup new accounts and lists a bitcoin price of just $2, compared to the Coindesk Bitcoin Price Index of $218.

Unlike mainland China, Hong Kong has been relatively lax in its approach to bitcoin regulation. There are already indications this incident is likely to change that fact.

MyCoin would hardly be the first exchange to go belly-up. The most famous case of this type is Mt. Gox, which lost 650,000 BTC in client deposits ($137 million at today’s prices) and additional fiat cash, leading to its bankruptcy. More recently, Slovenia’s BitStamp was hacked to the tune of more than 19,000 BTC ($4 million) in early January. This isn’t even the first such fraud to affect the Hong Kong market, as the operators of the GBL exchange disappeared with $4.1 million in client funds in November 2013, after just six months in business. An investigation after the fact revealed that the company had never been based in Hong Kong as it represented, but rather was operating out of Beijing.

It seems that there were enough red flags in the case of MyCoin to alert would-be investors that something wasn’t quite right at the fledgling exchange. In that sense, it’s no surprise that these were everyday citizens, not crypto-currency enthusiasts, who were taken for a ride. But with bitcoin’s believers hoping to take the currency mainstream, this kind of incident is the last thing the industry needs. Bitcoin prices have not yet been materially impacted by news of this latest fraud.

In the case of MyCoin, age old wisdom holds true: if it seems too good to be true – like 250 percent ROI in four months – it probably is. This is less an indictment of bitcoin and more an indictment of charlatans and naive retail investors. Bitcoin is just the latest shiny object being waved in front of their faces.