Cryptocurrency Pyramid Schemes Are China’s next target
The Ministry of Public Security (China) released a statement on its official website announcing that it will investigate and put an end to online pyramid schemes for cryptocurrency, online gaming and other categories.
Pyramid schemes fool people into investing their money and recruiting others to get more profit from incoming investments. Although these schemes are bound to collapse, it is often too late for investors to save their money. Last year, China not only heavily investigated these schemes but also ran campaigns to stop illicit recruitment agencies from ‘helping’ job-seekers by acquiring their money. The police were successful in finding the criminals, including ¥200 million ($30.2 million) from a 46 year-old woman. Earlier this month, two men were given life sentences after stealing ¥15.6 billion ($2.44 billion) from over 200,000 investors.
According to the ministry, it will collaborate with the industrial and commercial department to accomplish its objective and punish those who target students and / or ‘vulnerable groups’.
The crypto community is buzzing with both Ponzi and Pyramid schemes, including the famous exchange, Bitconnect. It was identified as a fraud by notable crypto users such as Vitalik Buterin, and for that reason many companies are keeping a low profile in terms of targeting more users. The U.S. Commodity Futures Trading Commission (CFTC) also filed a suit against two cryptocurrency companies for fraud on Friday. It is apparent that people are using Bitcoin and ICOs to lure others into false investments, however, China has already been tightening rules for cryptocurrency holders and exchanges. On Friday, China’s Central Bank issued a statement ordering banks to ‘carry out self-inspection and rectification’, and discontinue any services associated with cryptocurrencies.
It will only be a matter of time until China brings forward criminals and charges them for these schemes. So, regardless of China’s stance on cryptocurrencies, this move will be beneficial for the crypto community.