Chinese Authorities Uncover Massive $83 Million Filecoin Pyramid Scheme

China is known for its clampdown on crypto-related activities in the country, and a recent development involving a Filecoin pyramid scheme could see the authorities move to intensify their efforts against the industry. 

Filecoin Miners Involved In $83 Million Fraud

Lai Mouhang and four other executives of Space-Time Cloud Company, a Filecoin mining service provider, are currently standing trial at the People’s Court of Pingnan County for spearheading a pyramid scheme that led them to amass over $83 million in illicit proceeds from their activities. 

According to a local report, the company was formed in 2018 by defendants Lai Mouhang and Lai Moujun, who later recruited fellow defendants Hu and Liang in 2019. 2019 also happens to be the same year the company kickstarted its fraudulent activities.

The prosecutors allege that in September 2019, the defendant Lai Mouhang set up a Chinese community website and a WeChat public account which he used to actively promote and exaggerate the rewards (Fil coins) investors could make from investing in Filecoin’s business model and mining rewards system. 

As part of the scheme, the group imitated Filecoin’s economic model and created the filpool.io platform, which they used to introduce and publicize the distributed storage technology of their company and exaggerated how much investors could make by investing in mining on their platform. They also sold storage servers, cloud computing power, and other packages to the participants as part of their operations. 

MLM Activities

In February 2021, the defendants, in a bid to probably make more money, developed a partner-model Space-Time Cloud platform known as bpool.io. This was the platform that they used to carry out their MLM activities in a bid to lure more participants to the scheme and grow their operations. 

As part of their operations, the prosecution believes that the defendants encouraged participants in the scheme to obtain membership status by paying the purchase or rental fees for mining equipment. Members were also ranked in a certain order, and those who were able to convince others to participate were entitled to rebates and higher returns. 

The prosecution stated that the defendants’ actions were undoubtedly criminal as they defrauded participants of their properties and disrupted economic and social order. There are plans to further investigate for criminal responsibility.

According to the report, the authorities discovered the scheme in May 2022. As of then, there were reportedly a total of 57,122 and 37,015 users on the filpool.io and Bpool.io platforms, respectively, with both sites raking in more than $83 million worth of digital tokens.