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