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A Tea-Backed Cryptocurrency Ponzi Scheme Defrauds Over 300 Million Yuan From 3,000 Investors in Shenzhen

Six Chinese men were arrested on March 28 for running an RMB 300 million cryptocurrency Ponzi scheme in China’s southern city of Shenzhen, according to Southern Metropolis Daily.

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The six individuals were employees of a company, known as Shenzhen Puercoin Blockchain Group, which describes itself as one of the first group of blockchain industry promotion agencies in China.

The company issued a cryptocurrency called Puer Coin without the approval of local authorities, claiming that the value of the token was backed over 10 billion yuan worth of Pu-erh tea and Puer Coin holders could buy and sell the coin on the cryptocurrency exchange Jubi. 1 Puer Coin was equal to 1 yuan worth of Pu-erh tea initially. But in order to attract more investors, the company used previous investors’ funds to manipulate the price of Puer Coin, driving up a single token’s price from 0.5 yuan to 10 yuan.

It is reported that investors could buy Puer Coin using his credit card on-site or directly through its official website. Initially, token buyers were mostly the company’s employees and their relatives and friends. The purchase agreement stipulated that the company would buy back Puer Coins after 6 months, and token holders could liquidate their tokens on Jubi.

When a large number of investors flock to buy the cryptocurrency, Shenzhen Puercoin Blockchain Group manipulated the market maliciously and continued to cash out, as a result, Puer Coin became worthless and investors suffered heavy losses.

An investigation conducted by Shenzhen police found that the company was suspected of  illegally absorbing public deposits and illegal fundraising through its official website and the P2P platform QuQian.com which it had acquired.

Over 3,000 investors were scammed over RMB 300 million in this case, and the highest loss of a victim hit RMB 3 million, according to police. Law enforcement officers are still pursuing the remaining culprits and retrieving their ill-gotten gains.

Yan Zhaoxiong, a lawyer at Guangdong Junyan Law Firm, said this kind of scam is designed to be complicated and usually capitalizes on investors’ greed and ignorance about cryptocurrencies and blockchain. “ The pattern of this scam is very easy to replicate, and investors should be wary of jumping into this ‘hot’.” Yan said.

COMMENTS(1)

  • 8BTCnews
    3 months ago 8BTCnews

    Attack on scammers. A Tea-Backed #Cryptocurrency #Ponzi Scheme Defrauds Over 300 Million Yuan From 3,000 Investors in Shenzhenhttp://news.8btc.com/a-cryptocurrency-ponzi-scheme-in-shenzhen-scammed-over-300-yuan-million-from-3000-investors …

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