This Sought-After Virtual Currency Is a Pyramid Scheme? It Defrauded 350,000 Chinese investors out of $750 Million
A crypto ponzi scheme in southern China’s Fujian Province, known as Walker Financial(沃克理财), swindled 350,000 investors out of 5 billion yuan, or $750 million USD,and the project has been busted by police in Quanzhou in 2016, according to state-run Xinhua News Agency.
The chief suspect Wang Liangmiao only finished primary school before dropping out to work. He founded Walker Financial,an online financial platform in the disguise of financial innovation , in March,2015and issued a new virtual currency dubbed CPM. CPM had an initial supply of 300,000 and its offering price was $2 USD.
But the virtual coin can only be traded between platform members without real use case or development team.
With new members joining, the price of CPM continued to rise. But when the price went up to a certain level, Wang and his accomplices fractionalized the network token at a 1:1 ratio to double its number. As a result, CPM fell back to the initial price, encouraging investors to cash out. Each member account was allowed to participate in up to 7 times of CPM spin-off, and subsequently, the account would be invalid automatically.
If investors wanted to join the platform, they much be recommended by previous members, and pay the membership fees. One-star member would be charged 700 yuan, and 35k yuan could buy a six-star membership. A member would be rewarded with virtual coin ranging from 100 to 5,000 based on their membership fees. Within a year, the online financial platform attracted 350,000 members.
The craziest thing is that investors from across the country and even foreign investors gathered in front of the company office, queueing up months to get their hands on the cryptocurrency which was issued by the platform.
“ CPM itself has no value. It only circulates in the circle of platform members, and cannot be traded on other exchanges.I think sooner or later, it will collapse.” A CPM investor told the police. Another investor said he did not put that much money in this project, but the project promised that his investment would double in 45 days, and would gain 10-fold in a year.
At the beginning of this year, Wang Liangmiao was sentenced to 13 years in prison on a charge of organizing and leading pyramid schemes. The remaining 30 suspects were sentenced to fixed-term imprisonment of not less than three years but not more than seven years.
Data shows that at the beginning of 2018 alone, there were more than 3,000 odd knockoff platforms promoting fake blockchain products in China. And law enforcement in the country have beefed up their efforts to battle illegal fundraising.