Beijing Police Bust Virtual Collectible Investment Scam, Exposing $2.8 Million Ponzi Scheme

ChainCatcher reports that Beijing's Public Security Bureau's Economic Crime Investigation Team has announced the dismantling of a group that used investment in virtual collectibles as a cover for pyramid schemes. The investigation involved over 100 individuals and a total of $2.8 million in losses. Police have warned the public that any investment activities requiring "entry fees," encouraging referrals, and rewarding based on the number of recruits are all disguised forms of pyramid schemes.

According to police investigations, the organization used classroom sessions and WeChat group messaging to promote their "game rules" to the public. They attracted individuals to invest in virtual collectibles, promising lucrative returns, ultimately leading to financial losses for many. Through analysis of city-wide reports and incidents, police determined the investment project was suspected of organizing and leading illegal pyramid schemes.

Investigations revealed that the organization had a complete membership registration system and operated on two levels of compensation: static and dynamic. Participants could receive "static dividends" by using virtual currency for their initial investment. They could also gain "dynamic dividends" by recruiting new members, also known as "headhunting."

Police caution the public that some criminals use "digital collectibles" and "virtual currencies" as their "wealth codes." They disguise their illicit activities, such as illegal fundraising, under the guise of digital economy concepts and technologies. They attract investments and defraud victims by inflating the value or creating worthless "fake coins." The public must remain vigilant and avoid falling prey to such scams.