On World Consumer Rights Day, the China police, Beijing TV, and Beijing’s banking and insurance authority unearthed and slammed crypto-related scams.
China had its annual event, during which the media and authorities highlight instances of market abuse. In past years, Burger King, Nike, and Muji were all embarrassed.
Scams involving cryptocurrency were in the forefront this year
The Shanghai Public Security Bureau (PSB) claimed that a cryptocurrency pyramid scam has amassed over 100 million yuan (US$15 million) in the city.
A pyramid scheme is a fraudulent operation that makes money by recruiting an ever-increasing number of investors. Pyramid schemes inevitably collapse because there are only so many people in a given community, and the organization can no longer profit from recruiting investors. The few at the top of the pyramid are the only ones who make money.
Similarly, the defunct organization operated. It enticed investors to join by offering large cryptocurrency profits, then enticing them to attract newcomers with intricate and generous reward systems.
According to the Shanghai PSB, it involved 60,000 investors and reached 72 tiers of “pyramid” before coming to an end.
Two incidents of crypto frauds utilizing the RADR and OSK coins were revealed by a Beijing local television channel last year.
An interviewee from Heilongjiang, China’s northeastern border region, claimed that the RADR currency had stolen his family’s 570,000 yuan (US$89,604) wealth. The coin advertised itself as China’s most profitable cryptocurrency, but it was delisted in October of last year. He said that his family was not the only one who had been duped, and that others had been duped as well.
Another claim from a Beijing news station quoted a reporter covering the OSK coin’s community as saying she observed the coin’s price spike to 298 yuan (US$45) on Feb. 25, then the issuer rug-pulled the coin’s price down 90 percent in an instant.
Beijing’s financial watchdog singled out unlawful fundraising in the name of the metaverse and blockchain in addition to crypto.
The Beijing Office of Banking and Insurance Regulatory Commission (BIRC) has issued a warning to college students about metaverse and game-fi schemes that promise big rewards. The frauds, according to the warning, would entice students to buy cryptocurrency and game props in order to invest in the project. For the investment, some students took out usury loans.
Since China’s central BIRC issued a warning in February, fraud in the name of the metaverse and blockchain gaming has been denounced
Last year, a big number of non-crypto professionals were enticed by the Bitcoin price frenzy and rushed into the area, according to Liu Yang, partner and attorney at Chinese legal company DeHeng, and some of these amateurs were targeted by fraud. Scams of this nature can involve a huge number of people, attracting the attention of the media and regulators.
“I expect China will be even tighter in regulating and cracking down on cryptocurrencies, as well as blockchain-related fraud,” Liu said. “It’s also a worldwide phenomenon.”
Following last September’s crypto prohibition, China’s crackdown on the cryptocurrency-related business has continued, with the discovery of new mining farms, laws for unlawful crypto fundraising, and plans to crack down on illicit fundraising in the metaverse and NFTs.
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