Chinese Police Stop $13M “Blockchain” Pyramid Scheme

Chinese police in Xian have apprehended several individuals in connection with a pyramid scheme the suspects had been running out of Hong Kong since March 28.

Miguel Gomez,
1 hr ago


After several days of investigating an online platform, Xian police have detained several  suspects in connection with a company alleged to have been running a pyramid scheme, Huashang News reports.

The arrest on Wednesday occurred after a report submitted to the office of the Economic Investigation Department within the Xian Public Security Bureau, alerting to a platform suspected of running a scam.

In total, nine people were arrested, six outlets seized, and 86 million yuan ($13 million) found to have been invested in the scheme, the authorities announced.

“After nine rounds of careful investigation and continuous operations in the early days, [the bureau] grasped the fact that criminal suspect Zheng had illegal interests and organized network platform administrators Zhang Mou and Li Mou, and marketing vice president Gou to carry out criminal activities,” the report read.

According to the investigation, “Zheng” and the crew he set up started preparing the scheme in October last year and launched it on March 28, 2018 as a Hong Kong-registered company called DTC Holding.

The report said they spent 30,000 yuan (around $4,800) to bring in a foreign-looking individual to make the company look more legitimate and dupe the public into investing in the scheme.

“The organization also went to Cambodia, Phnom Penh, Xian, Ningbo and other places to hold cryptocurrency promotion meetings. They promised that members who invested 3 million yuan can earn 80,000 yuan per day, making profits of more than 2 million yuan in a month,” the report added.

A few months ago, China started a government initiative designed to identify people who use the premise of blockchain technology to scam investors.

While there’s no word as to whether this shutdown was part of the initiative, authorities said they had already identified 3,000 cases in which bogus blockchain companies were trying to defraud their customers.

According to Huashang’s report, “the Xian Municipal Public Security Bureau [...] will focus on cracking down on pyramid schemes,” in an effort to “strengthen financial services.”

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