The con man initially made good on his promises, luring more people (and more money) into the scam before disappearing.
A man in his 20’s from Anhui province, identified only by his surname Zhang has been arrested in eastern China for allegedly scamming 50 people out of almost 100 million yuan ($15 million), according to the South China Morning Post.
According to reports, Zhang tricked people into pre-ordering mining rigs at a substantially lower cost than market prices. Zhang said in online posts that he had a reliable supply of the rigs, and offered the machines for only 10,000 yuan ($1,500), compared to their regular price of around 30,000 yuan (over $4,500). But despite the suspiciously low price, Zhang exuded some legitimacy by actually fulfilling a few of the first orders—which turned out to be a show to get more people to throw money into the scam.
Pre-ordering is a common practice for some online stores, and Zhang told his buyers that the hardware will be delivered two months after payment. The con attracted several buyers particularly during BTC’s momentary spike last year—the coin reached almost $20,000 towards the end of last year, but suffered a huge drop early this year, and now plays around $6,000.
By mid-January, Zhang had defaulted on over 3,000 orders and disappeared. The con man then turned himself in, saying that he wasn’t able to fulfil the orders due to a slow supply and rising prices.
Reports say that the money Zhang amassed was spent on some machines, and some luxury cars for himself.
China was one of the biggest markets for cryptocurrency activities for a long time, until the government purged them out. Early this year, China began its crackdown on cryptocurrencies, starting with banning cryptocurrency activities and exchanges, and later extending its chokehold to miners by imposing energy restrictions for miners in the country.
But despite regulations, cryptocurrency mining survives in the country, with many using power sources outside the official electricity grid—hydropower being one, to stay underground and evade the government’s radar.
Apart from monitoring power usage to detect possible mining activities, the Chinese government has also been extending their “Great Firewall” to target international cryptocurrency exchanges that are bypassing their restrictions and continue to cater to Mainland residents.
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