Attn Whistleblowers: China Will Reward You for Exposing ICO Scams
- An inter-ministerial committee in China plans to reward individuals who report illicit ICO fundraisers.
- The decision could likely boost China’s crackdown on the regional cryptocurrency industry.
- ICOs are operating freely in China despite a sweeping 2017 ban.
China is planning to provide monetary perks to eligible individuals who expose illegal cryptocurrency crowdfunding campaigns.
According to sources cited by Sino Global Capital’s CEO Matthew Graham, China’s interministerial office looking after the disposal of illegal fundraisers sent letters to provincial and municipal offices on Monday. The documents prompted the regional departments to reward those who actively report fraudulent fundraisers in the blockchain and cryptocurrency space, otherwise known as Initial Coin Offering (ICO).
The announcement followed China’s extreme efforts in weeding out cryptocurrency-related operations from its jurisdiction. The country was the first to ban ICOs in an effort to protect people from shady investment schemes. Before the ban, startups operating from inside and outside China exchanged their newly-created tokens (similar to securities) for payments in existing currencies. Those firms promised handsome returns to investors. However, when their overstated business models failed, their tokens’ value plummeted soon after.
A report published by Diar in 2018 found that investors across the globe had lost about $100 million to ICO exit scams. A Chinese company, Shenzhen Puyin Blockchain Group, was single-handedly responsible for a $60 million theft. It raised funds for three ventures – ACChain, Puyin, and BioLifeChain. None of them developed an actual product.
Chinese ICOs Flourish Despite Ban
China’s sweeping ban on ICOs in 2017 reduced the number of fundraiser scams in the country but it never actually weeded out the menace. Local newspaper ‘The Voice’ reported last year a Shanghai local Mr. Zhang purchased a cryptocurrency called SauCoin on OKEx exchange and lost thousands of dollars worth of savings.
The ICO horrors continued to make their presence felt even in 2019. Plus Token, another China-rooted cryptocurrency scam, lately defrauded investors with $2.9 billion after claiming it would return each about 8 to 16 percent profits every year. It was later found that the company liquidated its $2.07 billion holdings [allegedly] via so-called responsible cryptocurrency exchanges.
With President Xi Jinping’s endorsement of blockchain technology, China appears to be at the last attempt of filtering out bad actors from the cryptocurrency space. The US Securities and Exchange Commission (SEC) practices a similar tactic against securities fraudsters to fruitful ends.
This article was edited by Samburaj Das.
Last modified: November 19, 2019 17:06 UTC