Illegal crypto and blockchain-related fraud cases on the rise

Earlier this week, the Beijing Municipal People’s Procuratorate released a new white paper on financial crimes (in Chinese). According to the white paper, illegal fundraising activities and financial crimes in Beijing are on the rise—not only did the number of fraud cases increased, but the scale and spread of these crimes also escalated. Crypto and blockchain-related fraud cases have also become more prominent over the past year.

According to the white paper, in 2017, prosecutors across Beijing arrested 1342 people in 889 financial crime cases and filed charges against 1480 people in 820 financial crime cases. In comparison to 2016 figures, the number of financial crime cases increased by 4.33% and the number of people involved in these criminal cases increased by 20.03%. In illegal fundraising cases, 817 were arrested in 428 cases in 2017—a 26.63% increase from the previous year.

According to Jiang Shuzhen, the director of financial crimes department at Beijing Municipal People’s Procuratorate, said there are still many issues and controversy surrounding financial crime cases. There need to be clear regulations especially on internet finance, crypto, blockchain and other emerging areas in finance.

Jiang noted that financial regulations in these emerging fields relatively slow. Recent cases of Huaqiang Coin (华强币) and Wuhang Coin (五行币) are examples of fraudsters using “digital currency” as a cover to attract investors.

Even though China has intensified its measures to curb crypto and blockchain scams (it is one of the first countries to ban ICOs), illegal fundraising activities using buzzwords like “blockchain” and “crypto” to scam investors is still becoming a growing problem in the country. According to the National Committee of Experts on the Internet Financial Security Technology (IFCERT), a government-backed industry organization, a total of 421 fake cryptocurrencies has been found as of April 2018, 60% of which are deployed overseas so it is hard to track and find.