This week Xinhua, the official news Agency of the government of the people’s Republic of China announced that in 2017 the law enforcement agencies stopped the activities of 107 fraudulent altcoins. These coins claimed the status of industry products Finance, however, according to the authorities, was an ordinary financial pyramid.
«Zero risk, high returns»
As the rising price of bitcoin, the race join a fraudulent altcoins, hoping to benefit from the increased attention of people to the cryptocurrency industry. SOHO Zhao (Zhao Shouguo), Professor of Economics at northwestern University in XI’an, said that the ban
government to conduct ICO has become another example of what «people will still get what they need»:
«The ban on ICO and closing exchanges of virtual currencies has created a market vacuum and gave rise to various fraudulent cryptocurrencies. Representatives of the suspects in the dirty game of coins tried to convince users that because of the ban the main crypto-currencies lose their relevance and now it’s their time.»
The journalists of Xinhua news Agency conducted a search for the word «coin» in social networks such as Wechat and QQ (popular instant messenger Chinese telecommunications company Tencent). During the search they found a closed group dedicated to Aldona, for example, «HBB Environmental Protection Coin», «Coin Radar (VBC) and Red Shell Coin (RSS)». The moderators of the groups were placed infographic demonstrating the high returns investors in order to entice users to invest money.
«Invite five participants, and you can receive 600 yuan ($90), even a beggar can do that,» promised the moderators groups.
Huang Zhen (Huang Zhen), Professor of the law faculty of the Central University of Finance and Economics in Beijing, explained that more such schemes appear due to the fact that duplicate altcoins cheap and easy.
Fraudulent coins – a new trend in the criminal world
As of the end of September this year, Chinese law enforcement agencies carried 5 900 criminal investigation for pyramid schemes, which in total gathered more than 30 billion yuan (4.5 billion dollars). The police has investigated 107 fraudulent cryptocurrencies, including «Five Elements Coin», «Onecoin» and «Ticcoin». The journalists of the Xinhua news Agency noted that these schemes used in their activities now popular concept of cryptocurrencies and blockchain to confuse investors.
In January, one resident of China have invested all their savings in the «Five Elements Coin» without my husband’s knowledge. Moreover, she persuaded ten of his relatives also buy a coin.
«They told me that the project is supported by the Central government for the promotion of technological innovation» — says the victim. «And they promised that my investment will soon be 4 million yuan (about 606 thousand dollars)».
In the end, she was in the center of the pyramid schemes, all her money was gone, and her husband divorced her when he realized that she spent all their savings.
47 000 participants and 613 million dollars a year
The police of the city of Haikou, capital of Hainan province, exposed the pyramid is called «Asia-Euro Coin». During the year it attracted over 47 000 investors to buy fake cryptocurrency, with around 613 million dollars. The suspect surnamed Liu (Liu) told investors that he cryptocurrency expert who has resources around the world. He conducted seminars in expensive restaurants to impress potential investors.
With the proliferation of mobile banking and social networking Ponzi scheme can quickly attract new investors.
«Because criminals are often located in different parts of China and organized fraud using computers and mobile phones, it is difficult to apprehend all at once and prove their guilt,» said Ren Jian (Jian Ren), the police in Haikou.