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High incidence of fraudulent pyramid schemes? The blockchain does not take this blame



In a case involving 2 million people, there are as many as 3,000 levels of pyramid schemes, and the amount involved is an astonishing 40 billion yuan. If calculated according to the current bitcoin price, it may reach hundreds of billions of yuan. Such a major case, because it involves bitcoin and other virtual currencies, not only attracts more people's attention, but also makes many people have doubts about bitcoin and blockchain, a new technology and new industry.

CCTV's report once again pushed the PlusToken case to the forefront.

I commented on the PlusToken final judgment in November last year. As this case once again attracts attention from all walks of life, as a lawyer who paid attention to the field of bitcoin and blockchain earlier and handled and intervened in many related cases, I would like to talk about the development of bitcoin and blockchain and why this field Fraud and MLM crimes are high.

Satoshi Nakamoto invented Bitcoin in 2008, and the technology used was named blockchain. Bitcoin does not rely on the issuance of a specific currency institution, but is generated through a large number of calculations based on a specific algorithm, and uses cryptography to ensure the security of all aspects of production and circulation.

6 Arrested for Crypto Scams in New Hampshire, US: FBI and IRS officials have raided multiple locations in Keene, New Hampshire, in a raid linked to the libertarian group Free Keene. During the raid, six people were arrested for alleged cryptocurrency scams. The indictment alleges that Shire Free Church accounts were actually used as charitable donations for an illegal virtual currency exchange business. One of those arrested was libertarian and Free Talk Live radio host Ian Freeman. (Decrypt) [2021/3/18 18:58:18]

Bitcoin's "decentralization" and other features quickly attracted a large number of fans. The "believers" of Bitcoin and future decentralized finance hoard Bitcoin, create virtual currency similar to Bitcoin, and conduct transactions to form the so-called "currency circle", including virtual currency trading platforms and virtual currency project parties, There are also investors and speculators. With the skyrocketing price of virtual currencies such as Bitcoin, the production of virtual currencies such as Bitcoin through "calculation" by special equipment is called "mining", and equipment manufacturers, "miners" and "mines" etc. . The blockchain technology itself has gradually revealed functions other than virtual currency. The application scenarios such as "value chain" and "credit chain" opened up by it are considered to be a revolutionary new technology for the Internet, and a large number of companies have devoted themselves to blockchain technology. The research and development and promotion of the chain are called "chain circles". Because they all use blockchain technology, the above three "circles" overlap and overlap to a certain extent.

News | Internet fraud gangs built a virtual investment platform and were sentenced to a maximum of 13 years in prison: Recently, the People's Court of Jiujiang District, Wuhu City, Anhui Province publicly sentenced Li Bing and other 41 defendants for fraud in the first instance. The court found out after trial that in October 2016, Li Bing, a native of Minhou County, Fujian Province, funded and registered a cultural development company in Fuzhou City. In May 2017, defendant Li Bing and defendant Li Fang negotiated to purchase a set of platform investment trading software with built-in profit and loss control functions, and set up a trading platform for virtual investment in projects such as "Bitcoin" and "Litecoin". The salesman of the company pretends to be successful people such as "Gao Fu Shuai" and "Bai Fu Mei" through WeChat, and uses deceptive words to chat with the opposite sex online. After gaining the trust of the victim, the victim was lured to invest in the virtual investment platform built by the company by sending false screenshots of investment profits. (People's Daily Online) [2019/11/19]

At present, in China, from the central government to the local government, the government is vigorously promoting blockchain technology. On October 24, 2019, the Political Bureau of the Central Committee of the Communist Party of China studied collectively and clearly requested to accelerate the development of blockchain technology and industrial innovation. On April 20, 2020, the National Development and Reform Commission officially included "blockchain" in the information infrastructure of the new infrastructure. According to public information, as of the end of December 2020, there are more than forty various blockchain industrial parks across the country. It can be seen that the "chain circle" represents an important direction for the development of new technologies and is an industry that the government supports very much.

Dynamics | Be wary of various Libra fake websites and ICO scams on the market: According to reports from the Dimensionality Reduction Security Lab, fake websites and ICO scams involving Libra continue to emerge on the market. Scammers claim to be able to pre-sell the unissued cryptocurrency Libra, and support purchases in the form of Bitcoin, Ethereum, etc., and even some counterfeit exchanges claim that Libra trading pairs will be launched soon. It is reported that Facebook has not officially announced the release time and circulation of Libra. The dimension reduction security laboratory hereby reminds the majority of users: Libra is a stable currency, developed and issued by technology giants such as Facebook, and does not require any form of ICO. Investors Don't believe in any gossip. For all information related to Libra, please refer to the announcement on Libra's official website ( [2019/8/6]

People's Bank of China, Ministry of Industry and Information Technology, China Banking Regulatory Commission, China Securities Regulatory Commission, and China Insurance Regulatory Commission "Notice on Preventing Bitcoin Risks" (Yinfa [2013] No. 289) clearly stipulates that Bitcoin It does not have the same legal status as currency, and cannot and should not be used as currency in the market. In 2017, the People's Bank of China and other seven ministries jointly issued the "Announcement on Preventing Financing Risks of Token Issuance", which reiterated the above regulations. At the same time, from the perspective of preventing financial risks, it is further proposed that any so-called token financing trading platform shall not engage in the exchange business between legal tender and tokens, "virtual currency", and shall not buy or sell tokens or "virtual currency" as a central counterparty. "Virtual currency" and shall not provide pricing, information intermediary and other services for tokens or "virtual currency".

South Korean telecom fraud used virtual currency to escape sanctions, resulting in a 26% increase in the amount of loss: Korean telecom fraud used virtual currency to escape the police, resulting in a substantial increase in the amount of loss last year. According to the statistics of the Korean Financial Supervisory Service (FSS), the "2017 Telecom Fraud Analysis" shows that there were more than 49,000 telecom fraud cases in 2017, and the loss amount reached 242.3 billion won, an increase of 26% over the previous year. [2018/2/5]

However, as Bitcoin is a virtual asset, Chinese laws show signs of shifting from passive protection to active-zce protection. Because although the aforementioned regulations deny the legal status of "virtual currency" as currency, it does not deny its property attribute as a commodity, and Chinese laws and administrative regulations do not prohibit the holding of Bitcoin. Article 127 of the "General Principles of the Civil Law of the People's Republic of China" stipulates: "Where the law has provisions on the protection of data and network virtual property, follow its provisions."

A large number of effective judgments have shown that due to the characteristics of value, scarcity, and controllability, virtual currencies such as Bitcoin have the commodity attributes of virtual property. The law supports the property attributes of individuals owning virtual currencies such as Bitcoin.

This is also the legal basis for the legal existence of "mining circles" in China. In areas with abundant water and electricity, bitcoin mines have even become a pillar industry in some places.

It is not surprising that a large number of illegal and criminal activities such as illegal fundraising, financial fraud, and pyramid schemes have occurred around Bitcoin. On the one hand, the blockchain is indeed a revolutionary technology with rapid development. On the other hand, the price of Bitcoin is soaring, and there is an obvious wealth effect. The industry is prosperous and there is more money, so it is naturally targeted by illegal activities. Like the early Internet, it was scammed and pyramid schemed under the banner of the Internet. Technology itself is neutral, depending on who is using it and what it is doing.

In fact, pyramid schemes and other "funding" fraudulent operation modes have already formed a fairly large group, and the reason why they have been banned repeatedly is because they can always refurbish their tricks and use a different face to deceive people. For example, the central government supports financial innovation, and investment guarantee companies are blooming all over the country. In fact, they are all "Ponzi schemes" of borrowing new money to pay off old ones. Another example is the rise of Internet finance, and the "capital disk" of a large number of fictitious projects has become the main reason for "P2P" thunderstorms.

Now, the blockchain and bitcoin industries are booming, and the "capital disk" model has shifted its position and entered this field. As I disclosed before, it attracts investors with various concepts such as film and television shooting, jewelry, and African investment, and uses the "Light Cone LCC Coin" of multi-level incentives of pyramid schemes.

Another example is the PlusToken case. The PlusToken platform claims to have the function of "smart dog moving bricks", that is, to conduct arbitrage transactions on different exchanges at the same time to earn the price difference. But in fact, PlusToken does not actually have this function, and does not have any actual business activities. It is just another "Ponzi scheme" under the banner of Bitcoin, and it is a cancer attached to the emerging industry of blockchain.

As the mainstream of the blockchain, the "chain circle" and "coin circle" are gradually breaking the ice and integrating with each other. Some chain companies are involved in virtual currency, and some currency companies are also involved in blockchain technology. However, mainstream blockchain companies are collectively resisting the "circle" of funds and pyramid schemes.

Now it is clear: Blockchain is an industry strongly supported by the state, and it is legal for individuals to own Bitcoin. As for behaviors such as "capital disk" fraud and pyramid schemes, they are severely cracked down by the criminal law. With the strict improvement of the proof standards of the new Criminal Procedure Law, the method of obtaining evidence for similar criminal acts will also be gradually improved.

In general, we believe that we should seize the global opportunity of blockchain technology, catch up with the development pace of the global blockchain industry, lead the development of this global industry, eliminate the false and preserve the true, and contribute positive value to the economy and society.

The author is a lawyer of Guangdong Dana (Wuhan) Law Firm


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