Chinese fitness app busted for alleged crypto fraud

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A popular Chinese fitness app is reportedly being investigated on allegations of crypto fraud, in the latest case of its kind to hit the headlines.

Fitness app Qubu, which rewards users for achieving fitness goals by issuing digital tokens known as ‘candies,’ caught the eye of local regulators alleging financial fraud and illegal fundraising practices, Nikkei Asian Review reported.

Candies can be earned for walking 4,000 steps daily over a 45-day period, which users can then exchange for upgrades or for cash equivalent at the prevailing market rate. Crucially, the tokens are marketed as “wealth management instruments,” and users are told they can generate returns of 36.8% over just 60 days.

Qubu goes further by incentivizing users to recruit others in their “downline” to boost their income. According to the firm, as many as 95 million users have registered for the service as of December 2019. However, some commentators have cast doubt on the veracity of the registered user figures, which would suggest as many as one in 10 mobile users in China had downloaded the app.

The app, which offers a built-in exchange for users to cash out their tokens, charges a hefty 25-50% transaction fee for processing trades.

According to documents obtained by Nikkei’s affiliate publication KrASIA, Qubu is now under investigation on several counts, with regulators keen to establish the true nature and structure of the business.

The Chinese authorities are notoriously anti-cryptocurrency, having previously raised strong concerns about the levels of fraud and scams operating within crypto and digital token markets.

While the government has more recently come to support blockchain technology and the transformative potential of the distributed ledger, regulators in China remain staunchly opposed to the cryptocurrency sector.

The investigation is the latest example of regulators taking action to crack down on crypto fraud, a common issue affecting regulators and law enforcement agencies worldwide. In the last month, at least five crypto exchanges in China have shuttered their operations, amidst what is being called “the biggest cleanup” of the sector since 2017.