Warning: Cryptocurrency Pyramid Scheme Explodes in Chinese Social Media
Cryptocurrencies become the hottest financial products as the spectacular increase (and drops) in value. While a brand-new asset could quickly produce a ton of wealth and spawned claims about massive technological, financial and social disruption, a lot of questionable investments and shady behaviour may also exist.
According to the data from Tencent Anti-fraud Lab, the most popular online pyramid selling categories includes financial investment, rebate fraud, virtual currency and WeChat fraud. Among all the kinds of pyramid selling activities, financial investment accounts for 30% and becomes the main mode of the emerging online pyramid selling.
The Tencent Anti-fraud Lab identified 3,534 pyramid selling platforms by the end of February 2018. There were 31.76 million participants and the daily increase of new identified pyramid selling platforms is around 30.
Tencent has published a white paper on pyramid selling in 2017. The white paper emphasizes the existing time distribution of each pyramid selling platforms, and pointed out that, an explosive growth in these platforms occurs in recent years. The new existing pyramid selling platforms accounts for 58% which exceed the sum of recent years’.
The white paper also indicated that, a lot of online pyramid selling use the name of innovative technology to expose rapidly through WeChat and QQ group, the most widely utilized social media platforms in China. Certain dodgy outlaws uses off-line payment, mobile payment, virtual currency payment and some other new trading methods which enhance the difficulty of regulation.
Some altcoins and ICO projects using the new concepts of blockchain and virtual currency to make promise of “zero risk, high returns” in order to induce people to invest. Group moderators would also show snapshots of their profit to newcomers to persuade them invest more. However, these kind of investment projects always involved in illegal issuing of token, cross-border money laundering, fraud, pyramid schemes and other risks.
Due to these investment activities are not under national regulatory institutions’ supervision, and the perpetrators always orchestrate the scams via computers and mobile phones, it is quite difficult to detain them or secure the evidence. Thus, investors are in a “high-risk location” and most of them are facing a significant loss.
With the spread of mobile banking and social media platforms, pyramid selling of virtual currency could pull-in more investors. It also remains to be seen whether China will move toward more forceful edicts.