China’s local newspaper has reported that Xi’an police has successfully arrested people involved in a pyramid scheme purporting to be a blockchain platform. The suspects created the “DBTC” platform and made it available for users from Mar. 28 to Apr. 15 this year. Almost 13,000 people registered and invested a total of 80 million Yuan ($13 million) on the scheme.
Details of the investigations claim that a person name Zheng was responsible for the idea, along with DBTC administrators Zhang Mou and Li Mou, and marketing vice president Gou Certa. They began working on the Multi-Level Marketing (MLM) project in Oct. 2017 and sold one coin at the price of 3 yuan ($0.48). The team also visited Cambodia, Phnom Penh, Xi’an and Ningbo to promote the project. Members were required to invest 3 million yuan ($0.4 million) initially, to receive 80,000 yuan ($12,732) every day and more than 2 million yuan ($0.3 million) a month.
The extremely high returns were a red flag, along with the fact that they hired an international ‘professional’ to act as the chairman. People claimed that their strong financial background as well as claims of being a ‘high-tech multi-national corporation’ were some of the reasons they were easily deceived.
Moreover, DBTC changed the price of their cryptocurrency on their own, and set up “shared earnings award” and “Team Performance Award” to reward their team members. Finally, Xi’an Public Security Bureau along with the Economic Investigation Detachment arrested nine suspects on Apr. 15 following complaints from users.
Pyramid schemes are on the rise in the crypto world as fraudulent companies lure people into the network with promises of impossible returns on their investment. Earlier this year, China’s Ministry of Public Security and the State Administration for Industry and Commerce (SAIC) began country-wide investigations to put an end to crypto-related MLMs.
A notice published by the ministry wrote, “We will conduct all-round and efficient inspections and dispositions and make great efforts to purify the cyberspace so as to comprehensively promote the establishment of ‘MLM-free network platform’ and ‘MLM-free communities.”