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Founder of Tea Tokenization Project Arrested in China

Chinese Authorities Clamp Down on $47 Million Digital Currency Project

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According to a Chinese news source, a provincial government has arrested six people who had defrauded over 3,000 people in China. The investors had been conned out of $47 million after they purchased a cryptocoin that was allegedly backed by a commodity.

How the Con Took Place

The six people created a company based in Shenzen that they called PEB. The firm officially began operations in January 2017. The token, which was powered by the blockchain, was named the Pu’er Coin.

According to the site for the project, the buyers of the token would hold a contract, which would represent ownership of Pu’er Tibetan tea. According to the claims on the site, the firm held billions of dollars’ worth of Pu’er tea in stock.

Other claims on the site were that the token could be exchanged on a secondary market named Jubi.com. However, on another site, the claims were that the contract holders could get a 12 percent return annually. For that to happen, an investor would have to lock in their investment for 12 months.

What the Investigation Discovered

Although the firm had made fantastical claims, the police found that they had a very limited amount of stocked tea. Besides that, they found that the firm’s promise of high returns in the short term via social media and roadshows at top hotels were unrealistic.

The police also found that the creators of the project were using their own funds to manipulate the secondary market. In doing so, they had managed to pump up the price of token throughout 2017.

This Crackdown Was not a Surprise

The crackdown this week was not a surprise. In fact, the firm had received numerous warnings before; the State Administration Market Regulation had even fined them a month ago. This is a body in China which is mandated to ensure just and fair market competition. The company had been fined $20 million for the crime of spreading false information in the form of advertizing. According to the regulatory body, the company had been making false claims of holding large stocks of Tibetan tea, which backed up the token.

Continued Crackdown on Crypto Fraud

This arrest is yet another major crackdown on crypto fraud in China. The country has recently ramped up efforts to fight unauthorized fundraising. This arrest comes just a short while after police in Xi’an arrested founders of a pyramid scheme based on crypto. It was claimed that the project had managed to siphon over $13 million from more than 13,000 people throughout China.

The scam was based on the Da Tang Coin linked to DTC Holding, a firm which was registered in Hong Kong. According to a report, the sole aim of the project had been to steal money via the pyramid scheme. During various promotions, they had claimed that investors could make about $13,000 daily if they made an initial investment of $480,000.

Image Credit: Deposit Photos

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