A Chinese court is currently presiding over a case that involves the Chinese Filecoin (FIL) mining company Shenzhen Shikongyun Technology and its four executives. They are accused of orchestrating an $83.3 million pyramid that enticed almost 100,000 individuals with promises of high returns, amassing over $83 million. The case centers on the founder of the company, Lai, along with three other high-ranking executives.
The prosecution contends that the defendants enticed individuals through the facade of a FIL currency mining platform, coaxing them to participate either by leasing mining equipment or paying fees for the said equipment. Allegedly capitalizing on the allure of substantial profits, the defendants drew in more participants and deceived them into accumulating assets, ultimately disturbing both economic and societal stability.
Prior to its closure by Chinese authorities in May 2022, the company had established online platforms like filpool.io and bpool.io, as well as launching a website under the domain ipfs.cn, all of which were utilized to inappropriately promote its services. These platforms collectively enabled the company to amass over 606.95 million yuan (equivalent to approximately $83.3 million) from nearly 100.000 scheme participants. A former employee of Shenzhen Shikongyun revealed that the company was aware of the legal challenges tied to operating within mainland China and had intentions to expand internationally. However, the arrests of the executives last year effectively curtailed these aspirations.
According to prosecutors, Shikongyun required members to either purchase or lease its mining equipment, and returns were generated through recruiting new participants into the scheme. Such deceptive practices were deemed a serious criminal offense that disrupts social and economic order.
Filecoin, a cryptocurrency based on a decentralized storage network, rewards storage providers with tokens. Shikongyun is not the sole Filecoin miner to attract attention from Chinese authorities. In December 2021, executives of RRMine, another Filecoin mining and storage services provider, were reportedly investigated by police in Chengdu. The company had previously shifted its headquarters to Singapore due to increased crypto restrictions in mainland China.
Although China has implemented strict regulations, the use of cryptocurrencies endures. Recent cases of money laundering involving stablecoins like USD Tether (USDT) emphasize the ongoing presence of cryptocurrencies in the country. This stands in contrast to the government’s stance against cryptocurrency trading. Despite the ban, Beijing has permitted Hong Kong to develop into a cryptocurrency hub. Following this authorization, Hong Kong has introduced regulations for retail trading on centralized crypto exchanges. In a notable move, HashKey Group and OSL have received regulatory approval to operate Hong Kong’s first licensed cryptocurrency exchanges for retail investors.
