A cryptocurrency project has been scuttled by Chinese law enforcement for allegedly soliciting investments with fraudulent claims.
In a report from the Guandong Daily, a provincial media outlet, Shenzhen police arrested six individuals last Monday. They were accused of defrauding 3,000 Chinese investors out of $47 million by selling a cryptocurrency they claimed was backed by a commodity.
The suspects allegedly set up a firm based in Shenzhen called PEB, which beginning in January 2017 issued a blockchain-powered token dubbed Pu’er Coin, according to reports.
The project’s website says holders of the token were entitled to hold a contract which represented ownership of an amount of Pu’er Tibetan tea the firm supposedly had in stock, which the firm claimed to be worth billions of dollars.
While the token could be exchanged in a secondary market called Jubi.com, another website later claimed the contract could bring in a 12 percent annual return if investors choose to lock their funds for 12 months.
Police reports say that, though the firm had only a “very limited amount of the tea in stock,” it also promised high short-term returns to investors in social media promotions and roadshows at high-end hotels.
The police also said the project succeeded in attracting investors via manipulation of the secondary market, using it’s own funds to drive up the token price during the course of 2017.
The arrests mark another notable crackdown on alleged cryptocurrency fraud in China as law enforcement in the country have taken a hardline stance against illegal fundraising.
Previously, Xi’An Police have arrested the founders of an alleged nationwide crypto pyramid scheme that is said to have collected $13 million from over 13,000 people.