coingeek.com
Authorities in China have charged the alleged operators of a Filecoin mining pyramid scheme that defrauded over $83 million from investors.
Chinese prosecutors filed fraud charges against Shenzhen Shikongyun Technology and its four executives at the People’s Court of Pingnan County, accusing them of luring investors into a fraudulent cloud mining scheme.
Lai Mouhang and Lai Moujun launched the company in 2018, with the two other defendants joining them later in the year, according to court documents. In 2019, the company stepped up its efforts and began recruiting thousands of investors through the website ipfs.cn. They claimed the company invested in distributed ledger technology companies, with a focus on the Filecoin ecosystem.
The four defendants then launched filpool.io and bpool.io, two supposed Filecoin mining pools. Investors could participate in the block reward mining process and earn FIL tokens by leasing mining machines from the company.
The defendants had a tiered investment system in which those that forked out more money were entitled to more benefits. For instance, those in the bronze membership or higher could recruit others and earn a portion of their recruits’ earnings, a blatant tell-tale sign of a pyramid scheme.
“With the lure of substantial returns, they enticed further participation and deceived individuals to gain assets, disturbing the economic and social order,” the prosecutors said.
The scheme’s popularity surged, and before the crackdown by authorities, it had lured over 57,000 investors who had invested RMB 607 million (US$83 million) in cash and over RMB 62 million (US$8.5 million) in digital assets.
The mining scheme’s popularity was despite massive efforts by the Xi Jinping government to boot out miners from China. Over the past two years, China has cracked down on the sector, forcing many miners to shut down while others relocated to Russia, Kazakhstan, and the U.S. However, data by Cambridge University showed that only the U.S. contributed more BTC hash rate than China.