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

Powerful New Ethash Miner Could up-End Mining Economics for Ethereum

John Moore
  • After delays, Linzhi has ordered the first chips for its new E1400 Ethereum mining ASIC
  • Testing on the unit, which hopes to smash the current MH/s rates of top-end Ethash mining kit, will begin in mid-November

A new range high-performance Ethereum mining equipment is apparently in the pipeline, and - should its ambitions be realised - is expected to upset the status quo in the sector. 

Shenzen-based Manufacturer Linzhi has reported that it has finally made a positive move on its $4 million investment in Ethash mining technology, having placed its first bulk order for chips almost a year after announcing plans to build the new unit. According to a Medium blog update, its order for the E1400 chip - which comes following a nine month delay  in its anticipated product development timeline - will provide the necessary parts to build 200 of its new miners, designed to harvest Ethereum and Ethereum Classic.

Ambitious Goals    

The units will, apparently, be used to test the company's new technology against the sector's incumbents. Chieft among these are the high-end GPUs of Nvidia, favored by enthusiast miners and supporters of the Ethereum blockchain, and the other Application Specific (ASIC) units produced by mining giant Bitmain and others to handle the current Proof of Work algorithm Ethereum requires to validate its blockchain.

Linzhi is hoping to have the new chips in its hands by mid-November, when testing can begin with an eye on rollout around the middle of next year. The Linzhi unit is the brainchild of Chen Min, the former head of chip design at Bitcoin mining hardware maker, Canaan Creative.

He has self-funded the company's effort to break into a market worth around US$850m per year at current ETH and ETC prices, with the ambitious aim to more than double Mega hashes per second (MH/s) rate of Nvidia's current zenith tech, while slashing power consumption at the same time. If those targets can be met, Linzhi could significantly change the economics of Ethereum mining - at least while the current Proof of Work model for the larger of the two Ethash cryptos persists. 

Ethereum's Move To ProgPOW

In late April of this year, Ethereum Developers approved a much-debated move to begin work a code change to introduce a Progressive Proof of Work (ProgPOW) mining model specifically to reduce the influence of ASIC miners such as that proposed by Linzhi, and thus the potential for centralization of the crypto's blockchain. 

While the reality is that such a move could be a long way away yet, it is being factored into business plans by Linzhi, which says it will keep potential customers abreast of developments before bringing the E1400 to market. While uncertaintly persists, it also seems that it will centre its efforts on the more certain sector of Ethereum Classic mining. 

Interestingly, the company is also floating the idea of a so-called 'Malus', or reverse discount, on its equipment when it finally goes on sale. While the company has explicitly set its pricing target at around a four-month Return on Investment, it could see large unit orders attract a surcharge, to "offset some of the cost advantages that larger customers have and encourage decentralization."

The company will present a full introduction to its new chip architecture at the upcoming Ethereum Classic Summit in Vancouver on October 3rd and 4th. 

Featured image: Pixabay