• Shanghai cops bust a $16 million cryptocurrency pyramid scheme

  • Shanghai police arrested more than ten people in connection with a $16 million pyramid scheme involving cryptocurrencies, the city’s first such case.

    • According to a post on the Shanghai police bureau’s official WeChat account, the Shanghai police bureau had launched an investigation across many provinces for over six months to track down the criminal ring.
    • According to the authorities, the alleged crooks set up an online platform in June 2020 that drew people in with membership perks and the promise of a steady income.
    • To achieve membership, users were requested to trade their fiat currency for platform tokens, however the tokens had no market value and their price was set by the platform. According to the police, this, together with the numerous membership prizes and levels, incentivized users to continue referring new accounts.
    • 60,000 member accounts were formed over 72 tiers of hierarchical ties and membership status throughout the platform’s reign, and the scam involved more than RMB 100 million, according to the post.
    • Among other marketing ploys, the scammers claimed their platform was a “unicorn” in global blockchain applications, and they even organized online and offline seminars to highlight the significance of their technology.
    • Despite a crackdown on the business, crypto frauds continue to be common in China. In February, the Supreme Court explicitly criminalized illegal fundraising through digital assets.
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