After sentencing a number of criminals linked to Ponzi schemes on June 9th, a court in Shenzhen, China has looked to remind the public to be more vigilant against these scams. 

Li Moufa, Long Mouqing, Lin Mouming, and Xiang Mouliang were sentenced in Nanshan court on Tuesday for their Multi-level marketing (MLM) or pyramid scheme that took thousands of Yuan. 

The defendant’s sentences ranged from two years and nine months to one year and one month with additional fines ranging from 100,000 yuan to 30,000 yuan. Their illicit gains were also turned over to the State Treasury. 

In yet another example of Ponzi schemes taking money from citizens, the courts had seen enough and were forced to issue the warning. Chinese citizens have often been duped by pyramid schemes, with more and more cases cropping up.  

Chinese citizens have a Ponzi Scheme problem

The most notable examples of this is the Plus Token scam which attracted large numbers of Chinese and Korean investors collecting over USD $3 billion worth of cryptocurrencies. The group exited in June 2019, leaving investors out of pocket. 

Some members involved were arrested on an exotic island in the South China Sea as they planned their escape but instances of the funds related to the group moving have cropped up on occasion. 

Mugshots of the six arrested Plus Token Scammers

Similar instances of MLM scams continued to crop up across China. Cloud Token, a token similar in concept to Plus Token also duped Chinese investors out of $500 million, with the authorities arresting 72 individuals connected to the Cloud Token (CTO) scam in December 2019. 

Back in December, one CTO victim who deposited $20,000 into their hands spoke to 8BTC about how the scam worked, saying: 

“The crypto scam claimed it’s a decentralized wallet that would reward its users for holding coins, payment was to be received in the form of the company’s utility token and the reward would be 6% to 10% of the invested coin amount.” then suddenly, “the man promising all these rewards vanished with funds from over 800,000 members wondering when and how they will get their initial investment back.”

Cloud Token cofounder Daniel Csokas.

Often drawn in by the foreign faces like Daniel Csokas that “head” the companies partnered with the lack of knowledge and stories they have heard about the big bucks crypto can bring in, the Chinese investors are getting duped. For this reason, the court in Nanshan, Shenzhen has decided to send out the warning.

The call from the courts coincides with a string crackdown from the authorities in Guangdong, the province which Shenzhen is in. The police froze thousands of cryptocurrency OTC traders and their clients for links to money laundering and other criminal activities. Some commentators fear that this could be the start of a wider crackdown on the industry as the arrival of the People’s Bank of China’s digital currency nears.