China Police Crush $13 Million Crypto Ponzi Scheme
Originally published on: BTCMANAGER
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April 20, 2018
Though global security forces are doing their best in the battle against all forms of unlawful activities, ‘cryptocriminals’ are unrelenting in their efforts to make unsuspecting and somewhat gullible virtual currency enthusiasts shed tears. Now, the Chinese police force has crushed a $13 million cryptocurrency pyramid scheme.
Security operatives in the city of Xi’An, northwestern China have arraigned the creators of an illegal crypto-based Ponzi scheme that allegedly generated at least 86 million yuan ($13 million) from more than 13,000 people.
According to Chinese news outlet Huashang News, the scam project began in March 2018, after several months of preparing and strategizing by the primary suspect whose surname is Zheng, in conjunction with three other accomplices.
Investigators in charge of the case stated that organizers of the scheme used a blockchain-based cryptocurrency called Da Tang Coin (DTC). The coin is also linked to DTC Holding, a firm registered in Hong Kong and controlled by the prime suspect.
In a typical fashion of a Ponzi scheme, the DTC team carried out various promotional campaigns in different cities in China, claiming their project would enable members to make 80,000 yuan (about $13,000) every day. Interested participants were asked to purchase DBTC coins worth at least $480,000 at the rate of $0.50 per coin, to enable them to reap massive returns on investment, the report said.
The suspects tried making their pyramid scheme look as legitimate as a genuinely international blockchain firm by hiring a foreigner who acted as the chairman of DTC Holding. They also organized their online presence in a way that made it impossible to tell their scheme is a fraudulent one.
Once the company’s name is looked up on the internet, several articles by popular Chinese media outlets pop up. The most popular one being the news about Evgeny Subbotin, the supposed chairman and general manager of DTC Holding, at a blockchain event organized in Xi’An.
Initial coin offerings (ICOs) became illegal in China since December 2017; however, credible organizers of the crypto-based fundraisers as well as bad actors have found a way around the ban. Some now conduct their legit and illicit activities via the WeChat messenger app.
Although the report failed to state how exactly the DTC team were able to organize such a fraudulent crypto-based project in the now digital currency-hostile Chinese environment, it is clear however that the organizers are masters in the game.
They promised investors that the DBTC token would be listed on several exchanges including Shangya, U-Coin, and ZB.com. Subbotin also claimed the coin would have real-life use cases in the hospitality industry, educational sector and even as a payment method.
Back to Reality
On April 5, some of the investors suddenly woke up from their long slumber and realized they’d been duped. They promptly reported the matter to the Xi’An police force who are now trying to salvage the situation.
The DTC team and many other cyberpunks have taken advantage of the unregulated nature of the ICO industry to defraud people In recent times. However, all that will be a thing of the past very soon as quite a vast array of nations have started formulating proper regulatory frameworks to govern the entire crypto space. It is expected that within a few years from now all the fraudulent crypto-related schemes still alive now would have crashed, leaving only a vibrant, healthy and highly secure crypto ecosystem.