Original author: Nancy
Reprinted by: Daisy, Mars Finance
At a time when the concept of cryptocurrency stocks was being hyped, a tweet claiming "millions of dollars frozen" instantly propelled MyStonks to the forefront. Key words such as fund security, trading platforms, and compliance risks quickly ignited investors' nerves, and panic quickly spread throughout the community.
Faced with questions and speculation, MyStonks quickly responded, stating that the freeze targeted only a single user and was intended to cooperate with the regulatory investigation. The user has been contacted and instructed to submit the necessary compliance information. This fund freeze has sparked debate about the security and compliance requirements of cryptocurrency-to-equity platforms, and a commercial battle appears to be underway. This article will review the incident and MyStonks' response.
The freezing of large amounts of funds is to cooperate with regulatory investigations, and ordinary users' deposits and withdrawals are not affected.
On August 13th, a user posted on the social media platform X that they had withdrawn over $7 million from Binance and deposited it into MyStonks, but approximately $6.2 million of that amount had been frozen, with withdrawal channels closed and funds dispersed, due to the platform requiring them to submit documents for risk control review. This news quickly garnered attention, raising market concerns about the security of MyStonks, particularly after it was flagged as a phishing site by OKX, further exacerbating the trust crisis.
In response to this incident, MyStonks officially stated that the platform recently received a regulatory enforcement request targeting a specific user. Upon receiving the request, the compliance team immediately contacted the relevant user through secure channels and provided a detailed information submission process. All collected information will be securely stored and shared only as required by law. This investigation only involves a single user and covers matters such as anti-money laundering, connections to criminal organizations or fraud rings, drug trafficking, sanctions evasion, and suspicious activity reporting. Deposits and withdrawals for ordinary users are not affected by this investigation and can proceed normally.
Meanwhile, MyStonks founder Bruce J also held a Space on the X platform to explain the incident in detail. He revealed that the compliance team received a law enforcement request targeting a single client last week and has contacted the client to assist with providing relevant documentation. However, the user has provided limited information at this stage, and it is unclear when the account will be unfrozen.
Bruce J explained that under the Bank Secrecy Act, stock exchanges may be subject to scrutiny of fund flows or transactions exceeding $1 million in a single or multiple transactions. Any anomalies identified require filing a SAR with FinCEN. Therefore, the platform's targeted investigation and withdrawal suspension were not independent actions. Cooperating with regulatory investigations is a legal obligation of every exchange, and the investigation does not indicate a problem with customer funds. He urged the public not to overinterpret the incident and stated that detailed investigation information would be sent directly to users to protect their privacy.
He further revealed that since its inception, the platform has registered over 20,000 users and processes approximately 500 to 800 deposits and withdrawals daily, with 99% of these transactions being problem-free. In the past 24 hours alone, MyStonks completed over 400 user withdrawals, with an average processing time of 28 seconds.
"The security of every user's assets and accounts is our lifeline. We have never lost or misappropriated a penny of a user's money. We insist on full compensation for user losses caused by platform negligence such as products/transactions. Regarding online rumors of "running away" and "fraud" and other malicious defamation, we call on everyone to obtain accurate information through formal and legal channels, and not to believe in or spread rumors." Bruce J emphasized.
According to Yu Xian, founder of the security firm SlowMist, the user's frozen funds primarily came from withdrawals from Binance, with DEX interactions involving STONKS and USDT exchanges. If MyStonks's compliance with law enforcement requests for risk control is established, the target user's fund transactions on Binance will need to be monitored.
Responding to compliance qualifications and operating models, emphasizing that compliance risk control is the core goal
The fund freezing incident of the MyStonks platform has attracted widespread attention and also triggered market discussions and doubts about the platform's compliance qualifications and operating model.
Some users believe that the platform's overemphasis on its MSB license may cover up its shortcomings in securities trading compliance and mislead non-US investors by taking advantage of information asymmetry; some users question that MyStonks packages private placement registrations as comprehensive compliance licenses and uses ordinary investors' unfamiliarity with US securities regulations for marketing; other users point out that the platform's practice of freezing funds rather than directly returning them differs from the operating practices of standardized financial institutions and may reflect loopholes in its compliance system.
In response to the above questions, MyStonks officially made the following response.
Officials emphasized that MyStonks is a fully compliant and regulated platform, holding a US FinCEN Financial Services Business (MSB) license and having completed US SEC Security Token Offering (STO) filings. The platform consistently adheres to legal and compliant operations and strictly adheres to regulatory requirements and risk control policies.
Regarding compliance details, MyStonks noted that the Form D it submitted is a federal filing officially required by the SEC and is subject to requirements such as Rule 504/506, including investor qualification verification, information disclosure, and compliance with anti-fraud provisions. This applies to entities issuing securities under Regulation D exemptions. MyStonks strictly adhered to both Regulation D and Regulation S requirements when submitting Form D. Regulation S explicitly permits the issuance of securities to non-U.S. investors outside the United States, a legal cross-border issuance path recognized by the SEC.
MSB registration, administered by FinCEN, a subsidiary of the U.S. Treasury Department, is a crucial step in entering the U.S. compliance system. Registered businesses must comply with the Bank Secrecy Act and FinCEN's anti-money laundering regulations, including customer due diligence (KYC), anti-money laundering (AML) monitoring, and suspicious transaction reports (SARs). MyStonks submits annual AML reports as required and is subject to FinCEN oversight and review. MSB registration not only confirms compliance but also serves as the beginning of ongoing compliance with regulatory obligations.
At the same time, MyStonks emphasized that all of its businesses do not fully belong to STO, so some of its assets are functional tokens or digital commodities, which are not within the scope of securities supervision and are not subject to Regulation D investor restrictions.
It is worth noting that according to MyStonks, since its establishment, some users have used MyStonks as a "coin mixer", which has been intercepted by the compliance department; the core goal of compliance risk control is to ensure the security of the platform and users, and not to use it for any illegal activities, including terrorist organizations, human trafficking, drug trafficking, money laundering, fraud, market manipulation, insider trading, etc., so as to meet the legal compliance requirements of global regulators.
From website attacks to abnormal capital flows, suspicions of a business war are emerging.
Following the controversy surrounding the rights protection campaign, MyStonks revealed that its website had been attacked by DDoS and received numerous complaints and reports. Furthermore, the financial activities of users involved in the rights protection campaign also attracted market attention. This series of events sparked speculation about the possibility of a trade war.
For example, according to KOL @OxMayyy, the user's funds involved in the rights protection campaign were rarely traded. Each deposit was withdrawn within an hour, and the funds were never returned to the original deposit address. This type of activity naturally triggers risk control measures. Furthermore, single or cumulative fund flows exceeding millions of dollars may be subject to regulatory scrutiny. Furthermore, MvStonks recently suffered a DDoS attack, demonstrating the platform's growing influence. Therefore, this dispute is more likely a reflection of market pressure on a growing platform. Therefore, she tends to view this incident as a business war rather than a simple rights protection case.
According to @CryptoPainter_X, the person involved had shared his trading experience as "uncle" in a group called Biyapay, stating that he had a large account balance and giving positive reviews of the platform. The screenshot was also forwarded by the official Biyapay account, which directly competes with MyStonks in terms of business model. He believes this appears to be a premeditated smear campaign, but there is currently no definitive evidence.
KOL @加密无恐 created a chart and published a detailed breakdown of the individuals and institutions involved, alleging that the victims were suspected of having a vested interest in Biyapay. The tweet stated that Biyapay's 2019 news revealed that BIYA GLOBAL LIMITED had received strategic investment from GDFX GLOBAL's Hong Kong branch and Hong Kong Kowloon Capital. GDFX GLOBAL is a forex and CFD brokerage platform that has been blacklisted by New Zealand, Hong Kong, and other jurisdictions.
Infini co-founder @郡主Christine also noted that in the commercial battlefield, some competitors often resort to underhanded tactics: first, they flood social media platforms with negative information, then disrupt normal operations through technical attacks, and finally, they exploit user trust with panic messages. For those who have experienced this, it's often a sign that your business has touched the core of the market. She believes that the real battle isn't just about retaliation, but also about protecting your achievements and defending your position.
Interestingly, after the MyStonks freeze incident, Biyapay not only emphasized multiple risk control and fund isolation measures but also launched an asset migration incentive program, offering rewards to users who completed any transaction on Biyapay using a MyStonks deposit address. This initiative was interpreted by industry insiders as both an incentive and protection for users, encouraging the safe migration of funds, and a marketing strategy to target competitors.
In response to the online public opinion storm, MyStonks said that it deeply regrets the recent attempts on the Internet to discredit the platform's security and spread negative information on the grounds of compliance and risk control, and this is also the inevitable path for a new asset trading platform.