Despite China’s ICO ban and the stricter Chinese government oversight, Crypto and blockchain scams are still appearing in China. But we all know there is no such thing as free lunch
The Recent Guizhou Blockchain Scam Investment Fraud
Lu hails from Hubei Province which is in northern China. After Lu invested nearly 65,800 RMB ($ 9,500) he realized that he had been taken advantage of by a scam project called “Guizhou Perfect Block Chain Investment” (贵州肽完美区块链投资有限公司). He later made several attempts to recoup his investment after he realized he had made a grave error investing with the company.
“It looked promising. We expected at least $6,000 monthly return” – explains Lu.
Nice returns, ha? He was enticed by the temptation of the “blockchain” era promises during last year’s bull market.
“A year ago, the company promised to be able to go public on the market immediately, but it has been delayed for a few months. Later, there was no one answering the phone and no one present in their office in Guizhou.”
Unfortunately, Lu was not the only poor man, invested in “blockchain dream“.
The reporters were told, there are more than 2,000 people who invested in the non-existing project that had stolen more than 100 millions RMB ($14,5 million).
Desperate for justice, they told their story to the local police who in turn began to investigate the case.
“Blockchain Scam Projects” are Actually Nothing New
Data shows that at the beginning of this year alone, there were around 3,000 Chinese MLM platforms using the concept of blockchain to steal others money. But actually, the methods used by criminals are “Age Old”. Simply by adding the word “Blockchain” to the title of their scam projects refreshes the effectiveness of their antiquated scams. Adding blockchain to any scam project makes exploiting money from others in China easier and of course is muchmore sexy to their potential targets.
For example, in May of this year, Shenzhen police investigated the “Puyin Coin” (普银币) fund-raising fraud case. The criminal gang manipulated the coin unit price from 0.5 yuan to 10 yuan. When a large number of investors followed into the market, they continued to cash out. Although the scam is simple in nature, the amount involved is considerable with a value of more than 300 million RMB ($43 million).
Another example is Da Tang Coin (大唐币). The online pyramid scheme was dismantled by the Xi’an police in April this year. The criminal gang publicly held a promotion meeting in many cities in China and abroad, setting up a 28-levels in charge (HEY HEY HEY!) . In just 18 days, the number of registered members reached 10,000.
There was also another kind of fraud involving cryptocurrency not native to China. For example, in the case of OneCoin, which is another MLM type of token was created and marketed by Bulgarians. The One coin team managed to raise a total amount of 1.6 billion RMB ($ 230.5 million). This was just the beginning of this sort of fraud that originated outside of China due to the fact that The Chinese central government had banned ICO’s as a mechanism to raise capital and foreign nationals saw this as the perfect storm and the perfect time to strike. Now that the ICO scene has died down in China its funny to note that Many scammers have become “foreign professors” in China.
Another trap that people have fallen victim to is “the higher the level is, the more credible it is”. Although most victims do not have the ability to really understand what blockchain is all about, this does not prevent people from investing. After all, the experts in suits on the stage have used the blockchain hype as their surgical weapon to defraud people. These gangs of fraudsters usually hold promotions in conferences in major hotels, having the same sort of swagger as the Wolf From Wall Street.
Fear of Missing Out AKA FOMO
The unquenchable thirst for wealth and The legends of easy crypto money coupled with the anxiety of shrinking wealth have squeezed people’s hearts in both directions.
“I didn’t catch the fast-moving economy in the past! Today I can only ride Prius while guys got Lambos! I didn’t catch the Bitcoin Express in the past”.
Then there is the speculative mentality of “making and leaving”. During the process of fraud, many “victims” have also received commissions after recommending a project to others, and will not say anything as long as they do not collapse. For example, in the “Titanium Coin” pyramid scheme of Xi’an investigation, the criminals got unwanted attention just because of the meeting of the fraud community was too loud!
In conclusion, the article did not mean to scare away investors. Opposite, during the bear market it is crucially important to invest into real blockchain projects with the mind and research. Do not let the impostors infatuate your mind with the enormous profits. Jealousy and greed are the sins inherent to the human race, but we were blessed with the consciousness to control it. Finally, do not let your sense of greed overpower your common sense.