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A pyramid scheme masquerading as a blockchain project was recently dissolved in the Chinese province of Shangdong. Police arrested more than 10 individuals in the city of Jinan on charges of creating an unidentified eCommerce platform that appeared to be a blockchain peer-to-peer platform. The miscreants had scammed victims out of around $47 million before the operation was halted, authorities said.

According to the China Money Network, the group played on the hype surrounding cryptocurrencies to lure in potential victims, anxious to invest in blockchain technology. They would use terms that are popular with the country’s central government, such as “blockchain, “Western Development,” and “big data,” and promise substantial growth and returns.

The accused offered different levels of memberships—each with a different price—and promised investors that their returns would be based on these levels. The investors would receive different amounts of both dividends and shares of the fictitious blockchain-based peer-to-peer platform depending on the level that they purchased. The company created a five-tier hierarchical rebate model, otherwise known as a pyramid scheme, and attracted a great number of college students desperate to make some money.

China has been trying to curtail illegal activity in the cryptocurrency and blockchain spaces, and has launched a public information campaign to warn consumers. However, there still have been a number of high profile incidents of fraud in the country. Just a couple of weeks ago, a tea-based blockchain project reportedly defrauded victims out of $48 million. An estimated 3,000 individuals fell for the scam, in which the Shenzhen Puyin Blockchain Group attracted funds through the issuance of a type of ‘tea token’ that was reportedly backed by “one billion pieces of high-quality” tea leaves. Six individuals were arrested in connection with that scam.

Last month, police the Shaanxi province arrested the founders of a fake blockchain platform called DBTC. It has attracted around 13,000 users and about $13 million in investments in a pyramid scheme that promised extremely high returns. The company hired an actor to perform as its chairman and claimed it was a ‘high-tech multi-national corporation.’

The crackdown on scams in China continues, and the country is taking a strong stance against the players involved. China’s Ministry of Public Security has posted a note on its website, “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.’” It’s certainly not going to be an easy task.

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