Chinese authorities intensify crypto pyramid scheme crackdown targeting fraudulent stablecoin projects

Chinese authorities have stepped up investigations into cryptocurrency projects suspected of operating as pyramid schemes, marking a renewed focus on curbing fraudulent financial practices in the digital asset sector. The probe, which targets unregistered entities exploiting investors through deceptive stablecoin investments, builds on the government's broader post-2021 cryptocurrency ban enforcement strategy [1]. These projects often mimic legitimate crypto offerings but rely on a referral-based model, where returns for early participants are funded by contributions from new entrants, creating the illusion of profitability [4].

The current crackdown follows a pattern seen in previous cases, such as the 2023 arrest of Yang Qichao, a Hangzhou-based operator accused of orchestrating a pyramid-like cryptocurrency scheme. Yang was sentenced to four years in prison, underscoring the legal consequences for those involved in such fraudulent activities [2]. Recent efforts in Shenzhen have also intensified, with authorities targeting projects that misappropriate the branding of major technology companies to lure investors. Officials have issued public warnings urging individuals to remain cautious and to avoid falling for grandiose investment promises [1].

These investigations highlight the risks posed by unregulated crypto projects, particularly those offering unrealistic returns with little to no transparency. Promises of triple-digit returns through fake stablecoin schemes have drawn in countless retail investors, many of whom lack the expertise to identify such fraud. The authorities emphasize the need for public awareness and a rational investment mindset, reinforcing the importance of due diligence in an increasingly complex financial landscape [1].

Internationally, similar scams have also surfaced, with cases like the collapse of the crypto lending platform CrediX—accused of an exit scam after a $4.5 million hack—demonstrating the global reach of such fraudulent schemes [3]. In Bangladesh, the Ponzi-style trading app MTFE collapsed, leaving thousands financially impacted [4]. These cross-border incidents highlight the necessity for coordinated regulatory actions to address the transnational nature of digital asset fraud.

Chinese regulators continue to tighten controls around digital assets, reflecting a broader trend of increased scrutiny in the wake of the 2021 cryptocurrency ban. Although no official details on the outcomes of the three unnamed projects under investigation have been released, the regulatory environment suggests continued vigilance and enforcement. As the crypto market evolves, regulatory agencies appear poised to maintain a firm stance against unauthorized and deceptive financial activities [1].

Source:

[1] AInvest. https://www.ainvest.com/news/chinese-authorities-target-3-crypto-projects-pyramid-scheme-probe-2508/

[2] MEXC. https://www.mexc.com/news/issuing-a-coin-and-withdrawing-a-pool-a-4-year-prison-sentence-a-complete-analysis-of-the-minefield-of-crypto/64362

[3] Cryptopolitan. https://www.cryptopolitan.com/exit-scam-credix-disappears-after-a-4-5m-hack/

[4] TBS News. https://www.tbsnews.net/bangladesh/crime/ponzi-trading-app-mtfe-collapses-tens-thousands-lose-everything-684958