Investors Lose $293 Million to Fraudulent Crypto Mining Scheme

Authorities in China have reportedly uncovered a fraudulent cryptocurrency mining scheme, through which 2 billion Renminbi (appr. $293 million) was stolen from the victims.

According to local news media outlet 8BTC, a fake Chinese company known as Lianxin Tech sold over 300,000 units of mining hardware to unsuspecting users during the course of four months. The fraudsters were able to mislead investors into thinking they would be able to make huge profits by purchasing and setting up the mining equipment being sold.

Investors Misled Into Thinking They’d Make Huge Profits

The victims were reportedly told that the mining hardware could be used to mine the firm’s token, called CAI coin, and also the Filecoin cryptocurrency.

CAI’s miner had been priced at 5,800 Renminbi (appr. $850) and Lianxin Tech’s representatives said that investors would be able to generate around 47 CAI coins per day through mining. At this rate, it would take around two months to earn the amount invested to purchase the miner, the firm’s representatives claimed.

Notably, the CAI token had been trading on a crypto exchange, known as AT, and the token’s price increased from around 0.5 RMB to 1.4 RMB, and later on, the token traded at as much as 2 RMB. Presumably, the token’s substantial increase in price may have motivated investors into acquiring the CAI mining machines

Fraudulent Shenzhen “Bitmain” Tech Company Busted

According to a report referenced by 8BTC, the AT exchange was actually controlled by the owners of the fraudulent Lianxin Tech company. The management at the Chinese firm allegedly manipulated the price of the CAI token, as they were operating the fraudulent trading platform.

In order to make it appear as if they were running a legitimate business, the CEO of Lianxin Tech launched another firm, called Shenzhen Bitmain Tech. Although the company had the same name as the well-known mining giant, Bitmain, there was no actual connection or relationship between the two firms.

Scammers’ Passports Invalidated, Charged With Investment Fraud

The scam was reportedly uncovered when an investor with the surname Zhao discovered that CAI tokens were still being generated, even though her mining hardware wasn't running. However, the scammers had already defrauded investors out of 2 billion RMB by the time Zhao realized what happened. The victims were left with nothing more than metal scrap which was reportedly worth only 600 RMB, but was sold for 5,800 RMB.

Police officials in Henan (where the crime took place) have invalidated the passports of the criminals and have charged them with fundraising, or investment, fraud

Bitcoin Hashrate Reaches All-Time High, As BTC Halving Event Approaches

Bitcoin’s (BTC) hashrate recently reached an all-time high according to data from Blockchain.com, a leading London-based block explorer service.

Bitcoin network’s hashrate, which represents the amount of computing resources being dedicated towards providing security for the cryptocurrency’s blockchain (among other uses), has been climbing steadily in the past few months.

Higher Hashrate Suggests Increased Interest in Mining Bitcoin

Available data from June 19, 2019 shows that Bitcoin’s hashrate currently stands at around 65.19 trillion hashes per second (TH/s). Notably, the BTC blockchain’s hashing power began to increase significantly as the pseudonymous cryptocurrency’s price crossed the $9,000 and then $10,000 mark.

In addition to improving the security of the Bitcoin blockchain, a higher hashrate indicates that the overall interest in mining BTC has surged - presumably due to the recovery made by the bitcoin price and also that of other major cryptoassets.

Hashrate May Be Used to “Hack Humans to Create Gold 2.0”

Commenting on the rising hashrate, Wall Street veteran and Bitcoin bull Max Keiser remarked via Twitter that an increase in hash power results in a considerable price increase for Bitcoin in most cases. Keiser believes that even some of bitcoin’s biggest supporters fail to understand the importance of hashrate.

The experienced financial analyst remarked:

[Hashrate can be thought of as] Satoshi’s ability to hack humans to create Gold 2.0.

Previous BTC Hashrate All-Time High of 60 TH/s Set in September 2018

Bitcoin’s recently recorded hashrate of over 65 TH/s is considerably greater than the previous all-time high of about 60 TH/s - which was achieved in September 2018. After reaching a new high last year, bitcoin’s hashrate had been declining steadily - as the cryptocurrency’s price also continued to plummet.

But after bitcoin’s value reached a low of around $3,150 in December 2018, the leading cryptocurrency’s price and also that of other major cryptoassets began to recover in 2019. Other key metrics used to assess the performance of the Bitcoin network have also shown marked improvement.

Less Than 16% of 21 Million Bitcoins Left to Be Mined

According to BitcoinBlockHalf data, there are only 3,220,350 bitcoins left to be mined as the Bitcoin protocol has algorithmically capped the maximum supply of BTC at 21 million. 

At present, there should be 17,779,650 bitcoins in circulation but analysts have estimated that nearly 4 million BTC has been lost due to account mismanagement - including users forgetting their private passwords to their crypto wallets.

Moreover, the Bitcoin halving is approaching (on track to take place on May 21, 2020), a critical event which reduces the number of bitcoins that can be digitally printed (from mining) by 50%. Several crypto researchers have noted that this is one of the most significant events in bitcoin’s relatively short history as the reduction in the BTC supply has had a notable impact on the crypto’s price.