Chinese law enforcement is currently in trouble with cryptocurrency scams. The latest incident in the country is related to a so-called Filecoin miner pyramid scheme. Police forces seized 400 million yuan ($62.5 million) worth of crypto assets in their raid on the ponzi scheme.
Chinese police have arrested 31 people who allegedly ran ponzi schemes associated with the Shanghai-based Filecoin miner producer IPFSUnion.
A large number of cryptocurrencies were seized in the raid, including ETH, USDT and FIL. The suspects in question were arrested in Shanghai, Wuhan and Shenzhen.
About IPFUnion
IPFUnion is one of the top 10 Filecoin mining firms with total effective storage power and also sells miners and computing power to end users either directly or through distributors.
On the other hand, according to the statement made by the company that provided data for the investigation to the Chinese police in the related investigation, the people in question obtained their equipment illegally and carried out fraudulent activities in this way.
However, it is not clear whether IPFUnion is accused of being directly involved in a pyramid scheme or of allowing its distributors to oversell non-existent equipment.
The History of the Event dates back to 2018
But the Ponzi scheme based on Filecoin miners has been live in China since 2018 after Protocol Labs raised $200 million in its initial coin offering the previous year.
Although Protocol Labs made many innovations to the network before launching Filecoin’s testnet and mainnet in 2020, some Chinese firms and brokers have unwittingly exploited this knowledge gap to sell subpar or fake Filecoin mining equipment to investors.
Following the incident, Protocol Labs was forced to issue an anti-fraud statement in 2018 to warn investors that it was not involved in any mining equipment sales.