18 Chinese Investors Lost 12.7 Million Yuan in 2018’s Biggest Crypto Mining Fraud
18 investors allegedly lost 12.7 million yuan ( $ 1.89 million) in China’s biggest crypto mining fraud in 2018 which was initiated by a notable photovoltaics (PV) company, blockchain-focused media 31 Degree North Latitude Pro reported on Feb.20.
Rijing Photoelectric (青海日晶光电有限公司), located in Delingha, northwest China’s Qinghai Province, was hailed as a key player for Qinghai’s PV industry with strong backing from local government. In early 2018, the company which struggled to make ends meet started to use the power that was approved to produce monocrystalline silicon to mine cryptocurrencies without the approval from authorities.
In August, the company plotted to sell warehouse space to crypto miners with the help of its shell cooperation, Juying Internet. Rijing Photoelectric claimed it could offer the electricity price of 0.33 yuan per kwh for miners.
In addition, the company presented a tripartite cooperation agreement (“Blockchain Industry Strategic Investment Framework Agreement”) signed between Rijing Photoelectric, Juying Internet and the Delingha Municipal government in April 2018, to investors who paid a visit to its industrial park on a hot August day. It wanted to ensure that the crypto mining project was endorsed by the government.
Investors were also told on that day that some provincial leaders would visit the industrial park to inspect the progress of the project in October.
After a three-day on-site inspection, 18 investors who were tantalized by cheap electricity price and the fact that the company was supported by governments poured 12.7 million yuan into the purchase of the crypto mining space which were allowed to accommodate 125,000 mining rigs.
Those investors began to install mining rigs on around 20,000 available seats, the figure that was just one sixth of originally stipulated 125,000 seats, on October 16 after provincial government officials visited the company.
Four days later, however, the second shell company registered by Rijing Photoelectric informed investors about the power outage and the shutdown of mining operations in the warehouse as it intended to increase electricity price to 0.42 yuan/kwh arbitrarily.
“ If you accept the higher electricity price, you can continue to run mining machines here. If not, you must pay off expenses incurred based on the electricity price of 0.42 yuan/kwh before leaving,” the shell company’s representative told investors.
Worse still, when investors wanted to cancel the contract with the company and to move their mining equipment out of the warehouse, they were told that the contract was invalid and they could not remove mining rigs unless they accepted the condition, according to Xiao Han, one of the 18 affected investors. What’s more, the company’s security guards threatened to smash machines if investors insisted on hauling them away.
Apart from the 12 million investment in the project, investors were worried more about the loss of multi-million yuan mining rigs. Therefore, they had no choice but to sign the high electricity bill and ultimately, took their machines away.
They were not the only victims of Rijing Photoelectric’s crypto mining scam.In April and July 2018, respectively, other two groups of investors were scammed out of large amount of money and even mining rigs by the company that used the same trick— using low electricity price to lure investors to install machines in its ware house, then forced miners to pay higher electricy bill, otherwise their mining rigs would be withheld.
18 investors had filed a complaint with police, but there was no hope to get their money back from the debt-ridden company.
Investigations found the tripartite cooperation agreement was a forged document with a fake seal of the government, and the company which was closely linked to gang groups was under the protective umbrella of local government agencies.
Cao Quanfu, the sales manager of Rijing Photoelectric who were charged with a massive fraud and forging government seals, was arrested on December 13 in Shenzhen.