18,000 Victims Lost 170 Million Yuan on Scamcoin Pyramid Scheme
Fraudulent schemes always take advantage of newly-emerged stuff to catch their next wave of prey. Recently, another pyramid scheme under the camouflage of cryptocurrency was busted in China. The scam project named “Zhaoyun gold (‘兆云金’ in Chinese)” swindled over 170 million yuan ($25 million) out of 18,000 victims.
Police in China’s Hunan province have arrested eight suspects involved in this pyramid scheme. An investigation found that the alleged global brand “Zhaoyun Group” was a shell company with 50 offices in a plurality of big cities.
The strategy of “Zhaoyun gold” is simple: lure more members in and manipulate the coin price. The classic pyramid scam recruited members via a promise of high returns and payments for enrolling others into the scheme.
To make their story convincing, some novel concepts like cryptocurrency and blockchain are flagged. It is of course difficult for the ordinary people to see through the smoke of these terminologies.
As they claimed, their cryptocoin was limited in supply with 170 million available. The first batch of circulating supply was only 3 million with the market price of 7 yuan per coin, but members could get the ICO price at 4.2 yuan. It indeed delighted the members for some time when they saw the price went up to 7.05 yuan after it was listed on exchanges.
To exploit more fortune from their members, the gang also designed courses on right-brain development and traditional culture education for teenagers, tuition fees for which could be paid in “Zhaoyuan gold”.
By the time when the scheme was cracked down, the gang led by the principal criminal surnamed Wu had amassed over 170 million yuan ($25 million) from 18,000 members in the past two months via more than 400 marketing levels.
The news came a day after the Vietnam–based crypto mining CEO was said to disappear with $35 million in investor funds. Prior to it, a few of crypto scams have been cracked down as reported by 8btc, and the country has also warned crypto pitfalls by revealing 421 fake cryptocurrencies.
All these scams reveal the troubled reality of unregulated crypto investing.