Chinese Court Charges 5 People in Filecoin Based Fraud Pyramid Scheme

The Chinese People’s Court of Pingnan County recently initiated a public hearing about a case involving five defendants concerning a high-profile crypto crime. In particular, defendant Lai Mouhang and four accomplices were accused of orchestrating pyramid-selling activities that have reportedly amassed over 600 million yuan.

How Did It Happen?

According to a local report, Lai Mouhang and Lai Moujun established Shenzhen Space-Time Cloud Technology in 2018 and later recruited defendants Hu and Liang. Sometime in 2019, Lai Mouhang reportedly created a Chinese community website and a WeChat public account. 

The prosecution asserted that through these platforms, the defendants extensively promoted and exaggerated the investment potential of distributed ledger technology (DLT). Alongside, they promoted the economic model of Filecoin, which hinges on a block reward system. This mechanism supposedly granted Filecoin tokens to miners who successfully unearth new blocks.

Subsequently, the accused purportedly designed a model imitating the economic structure of Filecoin. In particular, they created the Filpool platform under Space-Time Cloud Company. 

According to the report, they operated under the guise of selling storage servers, cloud computing power, and other packages. The defendants allegedly enticed participants to invest by promising various benefits, including static income and development opportunities. 

MLM Activities?

The scheme purportedly revolved around joint mining, promising increased income for greater investments and expanded downline development. Furthermore, the prosecution contends that Space-Time Cloud Company introduced another platform in 2021, using a partner-model approach to facilitate multi-level marketing (MLM) activities. 

By 2022,  the Filpool platform had reportedly attracted 57,122 members across 16 levels, generating substantial revenue from the sale of cryptocurrencies. Similarly, the BPool platform was said to have garnered 37,015 members over 11 levels.

The prosecution agency asserts that the defendants engaged in fraudulent activities that disrupted economic and social order. It added that they defrauded individuals and violated criminal laws by enticing participants with the prospect of lucrative returns. Additionally, it noted that they exploited a hierarchical rebate system based on recruitment. 

In light of the seriousness of the situation, the Chinese prosecution recommends a thorough investigation into the criminal liability of Lai Mouhang and his associates.

Sunil is a serial entrepreneur and has been working in blockchain and cryptocurrency space for 2 years now. Previously he co-founded Govt. of India supported startup InThinks and is currently Chief Editor at Coingape and CEO at SquadX, a fintech startup. He has published more than 100 articles on cryptocurrency and blockchain and has assisted a number of ICO’s in their success. He has co-designed blockchain development industrial training and has hosted many interviews in past. Follow him on Twitter at @sharmasunil8114 and reach out to him at sunil (at) coingape.com

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