Chinese Police Take Out $13 Million Crypto Pyramid Scheme

The suspects behind the scheme spent months crafting what appeared to be a legitimate company, complete with press information about investing activities.
Shelby Rogers

China's police officers arrested the leaders of a nationwide cryptocurrency pyramid scheme. According to local news reports, the scheme took money from over 13,000 people and brought in 86 million yuan (roughly $13 million). 

The scheme launched in March 28 after months of preparation by a primary suspect and three accomplices, local media source Huashang News reported. The investigation referenced a cryptocurrency called Da Tang Coin (DTC), a currency linked to DTC Holding. However, DTC Holding was a completely fabricated company that was registered in Hong Kong. 

In order to attract customers, the fake project and the suspects in question hired a "foreign-looking man" to act as chairman of DTC Holding in attempts to build up a company image as an international blockchain startup. 

The country-wide cryptocurrency scheme promised members that they could make 80,000 yuan (approximately $13,000) per day after an investment of $480,000 to purchase the Da Tang Coin (DTC) at $0.50 per token. The Chinese police force noted that these promises were listed on multiple exchanges. 

The fake company even went so far as to publish media notes about themselves. There was even a China Daily piece from March 21 of this year in which a man named Evgeny Subbotin -- listed as the general manager and chairman of DTC Holding -- attended a major blockchain event in Xi'An. 

Media reports even said the DBTC coin would be up for exchange on places like Shangya, U-Coin, and 

The Xi'An police force started its investigation on April 5 after being tipped off from complaints from people involved in the scheme. 

China's Crypto Pyramid Scheme Struggles

This most recent bust comes as part of the Chinese government's promise to crack down on pyramid schemes around the country -- particularly those involving ICOs and cryptocurrencies. 

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The Ministry of Public Security issued a statement in January about the types of organizations that could be identified and analyzed by government officials. 

"The public security organs and industrial and commercial departments of the country will continue to carry out special rectification in key areas and...concentrate on destroying the pyramid selling organizational system, severely punishing the members of the pyramid selling field, annihilate and destroy the network pyramid selling and criminal activities, [and] earnestly safeguard the legitimate rights and interests of the general public as well as the economic and financial order."

While the public statement doesn't exactly define what constitutes a pyramid scheme, it's clear that there will continue to be increased scrutiny around companies attaching themselves to cryptocurrencies. 

Via: Coin Desk

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