IPFS Mining Machine Scam Runs Rampant in China
The IPFS mining machine scam which promises high returns on mining a cryptocurrency, called Filecoin, has recently run rampant in China, ensnaring hundreds of thousands of unsuspecting investors , Interchain Pulse, a Chinese blockchain media outlet, reports on April 15.
Before we go any further, let’s clarify the relationship between IPFS and Filecoin. IPFS stands for Interplanetary File System that is a next-generation web transport protocol to make the Web faster and more decentralized. Filecoin is a blockchain project built upon IPFS, which incentivizes data storage on the network with its native token Filecoin (FIL).
An IPFS mining machine vendor, known as Huaye Blockchain, exhibited its mining rigs which are claimed to mine Filecoin at the 7th China Information Technology Expo (CITE 2019) which was held in Shenzhen last week by the Ministry of Industry and Information Technology(MIIT) and the municipal government of Shenzhen. The company attempted to take advantage of the government-backed platform to lure new investors and convince them these devices were reliable and profitable.
Moreover, the company hired many amateur salespersons, including Chinese Dama, referring to middle-age or older women, to promote their products at the scene.
“Have you ever heard of IPFS? It is the next-generation internet protocol and represents the future of blockchain,” a woman in her 60s told expo attendees with great confidence. The woman who knows how to talk nonsense added that “ the token of IPFS is called Filecoin,and it will become a crypto that can record 10000% or even 100000% returns in the future.”
She even taught interested investors how to buy mining rigs via a designated website. “After the payment, your mining rigs will be managed by Huaye Group and you can ride the gravy train,” the woman claimed.
As Filecoin is not a tradeable token at present, the so-called IPFS mining machines are nothing more than a pure ponzi scheme.
An investigation by Interchain Pulse found that Huaye Blockchain has no official website, let alone the introduction of its IPFS mining machines. But the order page displayed by salespersons showed four types of mining rigs developed by the company, with prices ranging from 5,600 yuan to 504,000 yuan.
If investors pay for the mining devices, they cannot see a physical product, except for digital assets sitting in their accounts.
In fact, crypto mining machines developed by Huaye Blockchain are used to mine a little-known token, dubbed ‘ABT’. In addition to ABT, the company also issued other five tokens,and teamed up with a wide range of multi-level marketing (MLM) companies to conduct illegal fundraising activities in the name of blockchain and cryptos.
A lot of victims complained on Baidu Tieba, one of China’s largest online forums, that they have lost hundreds of thousands of yuan in the ponzi scheme.
But Huaye Blockchain is not the only vendor to sell fraudulent IPFS mining machines in China. A technology company in Henan Province defraud investors of 2 billion yuan by selling similar cryptocurrency mining machines. Interchain Pulse reported at least 30 companies in the country are misleading investors into buying useless IPFS mining machines.
“ Filecoin’s mainnet is still under testing phase, and so-called IPFS mining machines currently sold in the market are useless,” said Dong Tianyi, an IPFS/Filecoin evangelist in China, who added that after the Filecoin mainnet goes live, all tokens mined by these devices are worthless.
Last December, The Protocol Labs, IPFS and Filecoin teams issued anti-fraud statement for communities in China and Hong Kong, saying “We do not yet have a Filecoin testnet program, and we have not yet been working with any miners. ” Investors are reminded to stay away from any exchange or entity who claims to be buying, selling, or trading Filecoin.