Shanghai Police Topple US$16M Crypto Pyramid Scheme

16th March 2022
Shanghai Police Topple US$16M Crypto Pyramid Scheme
Image Credit: Weixin, Shanghai Public Security Bureau

Shanghai police have nabbed more than 10 individuals connected to a US$16 million cryptocurrency-based pyramid scheme, in what was the city’s first such case that was cracked.

According to the Shanghai Public Security Bureau’s WeChat account, police conducted a six month investigation across “several provinces” and discovered that the platform’s server was set up overseas by an individual named “Mou”.

Police said that the victims were asked to exchange their fiat currency for platform tokens to gain membership, but the tokens had no market value as their price was artificially manipulated by the platform.

Victims were also paid in these tokens as referral rewards, which incentivised them to seek out new users. According to the post, 60,000 member accounts were created across 72 levels of “hierarchical relationships” and membership status.

Mou also allegedly promoted the platform as a “unicorn in the global application field” and “the world’s fastest public chain”.

Crypto crime on the rise

According to a report by blockchain analytics firm Chainalysis, cryptocurrency crime reached an all-time high of US$14 billion in 2021, with illicit activities ranging from stolen funds and ransomware to scams including DeFi “rug pulls”. In China, crypto investors have lost more than US$2.8 billion to rug pulls.

Earlier this year, Chinese authorities arrested eight people and froze nearly US$1 million worth of cryptoassets involved in a rug pull scam involving DeFi platform Gainswap.

While China completely outlawed cryptocurrencies in September 2021, it has rolled out its own CBDC (central bank digital currency).

Written by Bread News Team
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