A report this week from CCTV News in China has revealed the details of a recent raid that took place in the in the Jian'an District of Xuchang City, involving a gang of cryptocurrency scammers.
While the raid took place in August, the details were only made public this week. Police say that they confiscated up to 1.3 billion yuan, or $193 million in the raid which in the form of cash notes stashed throughout a luxurious villa. The investigation took only two months and began after police received tips about a multilevel marketing scheme that was using the hype behind blockchain technology to hook investors into phony projects.
The company was reportedly called “I Am A Clown” or IAC and claimed to be a social media platform based on blockchain technology, big data, and artificial intelligence. However, the project was nothing but vaporware, designed to bring investors into a pyramid scheme.
CCTV News reported:
Recently, the Public Security Bureau of Jian'an District, Xuchang, Henan Province notified a large-scale network pyramid scheme. The main suspects are hiding outside the country, remotely manipulating the network platform, using high returns as a bait, and developing a large number of off-line personnel to engage in pyramid schemes. Up to now, the police have arrested 27 suspects. In a house dedicated to hiding illegal income, the police seized up to 1.3 billion yuan in cash.
Yuan Xianchao, instructor of the Economic Crime Investigation Brigade of the Public Security Bureau of Jian'an District, Xuchang City, explains:
"It is a social promotion platform based on big data and blockchain technology, but in essence it adopts the membership recommendation registration system. Members paying the entrance fee, the platform sets a high return, to lure members to join, pull the head, develop the form of the offline, obviously a network (network) transmission (sales) mode. The police found through investigation that the company was registered in Hangzhou, but it was a shell. The legal representative of the company, Shen, did not actually participate in the operation. Instead, someone impersonated Shen’s identity for promotion and commercial activities."
Xianchao said that the scammers attempted to use shell corporations to hide their identities. Xianchao said:
"During the investigation of the company's legal person, it was found that after the company was registered, the legal person was outside the country all the year round, and there was no such thing in the territory. What about the promotion event? Obviously it is done in the name of the prescriber. Virtual "seed" development downline In order to find out the specific situation of this network marketing gang, the police conducted an in-depth investigation on the MMC's MLM platform, and mastered the gang's organizational structure, key members, and the background data and capital flow of the platform. The police sent investigators, registered members of the platform, and conducted in-depth investigations into their mode of operation. The police found that this platform virtualized a transaction object called "seed", with high returns as a bait to attract new members. New members must be activated by the activation code of the old member before they can register as a member, before they can purchase, hold the so-called "seed", and develop subordinate members."
Liu Bo, member of the Public Security Bureau of Jian'an District, Xuchang City said that the scammers would sometimes cash out hundreds of thousands of yuan per day. Bo says:
Many accounts are basically cashed out every day. The largest amount is cashed out. The largest is hundreds of thousands. The least is to put this on the ATM every day. Zhang Kali’s full amount of 20,000 yuan was taken. Through investigation, the police identified more than 10 suspects who were responsible for withdrawing money for a long time. After these people take money from all over the country, they usually drive to Zhejiang Jinhua. Yuan Xianchao, instructor of the Economic Crime Investigation Brigade of the Public Security Bureau of Jian'an District, Xuchang City: Using cash withdrawals, the money was taken out for cash precipitation, not on the bank account.
Crypto Scams Still a Significant Problem
Crypto scams and security remain a serious concern for the industry. This week, CryptoGlobe reported that $1.7 billion worth of cryptocurrency was lost to thefts and scams last year. There was also news this week that 15 suspects were arrested in Taiwan for their alleged involvement in an $8 million crypto scam.