Chinese Authorities Crack Rug Pull Scam, Arrest 8 Individuals

The public security bureau of Chizhou city in the eastern province of Anhui has frozen six million yuan or nearly $1 million worth of crypto assets and arrested eight people for defrauding its investors since last year.

Rug Pull Crypto Scam

Chinese authorities have arrested eight in a rug pull scam involving 50 million yuan or $7.8 million in digital assets as the Beijing crackdown continues. The report suggested that several investors were duped in a scheme that let the alleged perpetrators transfer the liquidity to an “anonymous pool,” thereafter laundering the funds without investors’ consent.

It all started after an investor reported a loss of 590,000 yuan or $92,882 worth of cryptocurrency in June 2021. After conducting a thorough investigation, the Chizhou police arrested eight people from different provinces, including Guangdong, Sichuan, and Hunan, in December. The police also seized luxury cars and villas from the accused, who allegedly swindled money from investors.

Talking about the case, the Chizhou authorities wrote,

“After the investigation and analysis by the police task force, it was found that this case was a typical case of illegally obtaining virtual currency by using blockchain technology.”

The police have not yet mentioned the name of the malicious DeFi project, but Chinese crypto-journalist Colin Wu reported the platform to be GainSwap.

Rug pulls have become a common occurrence in the crypto industry. As reported earlier, they accounted for 37% of all scam revenue in 2021 as opposed to just 1% the previous year.

The latest news comes less than a week after the Chinese law enforcement agency disclosed solving 259 cases related to cryptocurrency money laundering. The Ministry of Public Security also reportedly seized cryptocurrencies worth 11 billion yuan, or nearly $1.7 billion.

High-profile CBDC

China’s opposition to cryptocurrencies isn’t new. Hence, the policymakers have taken the CBDC route, in sharp contrast to assets such as Bitcoin and Ethereum.

Despite being developed since 2014, the People’s Bank of China (PBoC) is yet to fully implement the digital renminbi nationwide. In a bid to increase adoption, the central bank has dispersed tens of millions of the tokens. CBDC pilot projects have also been unveiled in 10 regions, including Shanghai and Beijing. These steps have led to transactions crossing the $1 billion mark.

Earlier this month, Chinese technology behemoth Tencent announced adding support for the country’s CBDC to its WeChat Pay wallet, one of mainland China’s prominent payment platforms.

This article was first published on: Jan 18, 2022