The police in Shanghai have arrested more than 10 people that are connected to an approximately $16 million pyramid scheme that involved cryptocurrencies. This marks the first case of its nature to be solved in the city.
The police bureau in Shanghai conducted an investigation that spanned over 6 months and across various different provinces in order to track down the criminal ring, per a post on the official WeChat account of the bureau.
The suspects had set up an online platform back in June of 2020 which then attracted users via membership rewards and the promise of static income, according to the police.
Users were in fact asked to exchange their fiat currency for platform tokens in order to gain membership. Unfortunately, the tokens had no market value whatsoever, as their price was in fact being controlled by the platform. Users felt encouraged to keep referring new accounts, by both this and the numerous membership rewards and levels according to the police.
During the course of the platform’s existence, 60,000 member accounts were created that spanned 72 levels of hierarchical relationships and membership status. The scheme was also involved in more than RMB 100 million, said the post.
Among the arsenal of marketing tactics and tricks, the scammers made note of the fact that their platform was also a “unicorn” in global blockchain applications, which even organized both online and offline lectures in order to promote the significance of their technology, as reported by The Paper, a Shanghai newspaper.
Crypto scams are, unfortunately, still pretty prevalent in China, despite the crackdown on the industry. The Supreme Court has formally criminalized fundraising via digital assets illegally back in February.