Chinese traders accused of illegally collecting $56 million in BTC
China is finding out that they are not immune from cryptocurrency scams. On May 22, CoinDesk reported that two over-the-counter market traders in the country were accused of illegally collecting BTC from more than 100 traders as part of a loan scam that generated the two over $56 million.
According to a story reported in the state-owned newspaper, 20 over-the-counter traders filed a complaint with the police department in Hangzhou around the middle of April alleging that the two individuals had defrauded the traders with a promise of interest on the BTC that they deposited with those behind the scheme. Yi Zhou and Xiang Li operated chat groups that OTC traders used to post bids and asking prices. This gave them the opportunity to meet several traders to propose their “high interest” scam.
According to the report filed by the victims, both Zhou and Xiang claimed over these chat groups that they could exchange BTC as futures and do so while providing interest. The victims were swept into the scam using a Ponzi scheme where small amounts were delivered on time. This helped them gain the confidence of the victims who soon initiated thousands of orders totaling 7,000 BTC.
One of the alleged victims explained, “I began OTC [over-the-counter] Bitcoin trading since 2017, unexpectedly I was cheated by more than 2 million yuan this year. As a senior bitcoin speculator, I always buy low and sell high. I trust my peers.”
These kinds of scams are becoming a serious issue across the globe. In April, it was reported that a group of scammers was impersonating Chinese officials, asking for money to be transferred using BTC machines. In Australia, crypto scams increased by 190 percent in 2018 in comparison to the previous year.
France is another country who has had serious issues with crypto scammers. In September 2018, the French financial market authority banned a group of businesses who they claimed were running illegal operations. This led to the banning of 21 websites within the country.
The reason that these two were able to be so successful in China was because of what is considered a gray area related to over-the-counter trading and financial loans using cryptocurrencies. OTC trading has become the primary fiat currency gateway that cryptocurrency traders use in China. This became the primary means after the central bank issued a ban on all initial coin offerings (ICOs) as well as fiat to crypto trading exchanges in September 2017.
This has led many would-be investors to find alternative means to make trades, opening up a clear opportunity for scammers to take advantage of those who are willing to take risks in hopes of gaining big rewards.
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