Major Chinese Filecoin Miner Accused of Orchestrating $83.2 Million Pyramid Scheme

A Chinese local court has started the trial in the case of Shenzhen Shikongyun (Space-Time Cloud) Technology, a major Filecoin mining firm, for an alleged $83.2 million pyramid scheme.

The ongoing trial in Pingnan County in the Guangxi autonomous region involves the company’s four executives, including the founders.

The defendants allegedly lured customers into the scheme under the pretense of mining FIL coins. They then required participants to obtain membership qualifications by paying fees for mining machine purchase or rental.

Furthermore, members were required to form a hierarchical structure, get more people to participate, and use high returns as bait, among other violations.

Therefore, the prosecution said, the defendants used exaggerated profit predictions to attract investors, promising excessive returns for storage servers sold in a pyramid operation.

“With the lure of substantial returns, they enticed further participation and deceived individuals to gain assets, disturbing the economic and social order,” the prosecutors were quoted as saying.

Expanding Operations

According to the report, Lai Mouhang and Lai Moujun established Shenzhen Shikongyun Technology in 2018. Defendants Liang Mousheng and Hu Mou joined soon after.

In September 2019, Lai Mouhang set up a community website with the domain name ipfs.cn and a WeChat public account, “vigorously promoting and exaggerating the investment prospects” of distributed storage technology and Filecoin’s economic model, said the report. 

The defendants developed their filpool.io platform, using it to promote the company and “exaggerate the profit prospects of the technology.”

In February 2021, they developed the partner platform bpool.io to further carry out multi-level marketing (MLM) activities.

Customers were asked to invest more money and bring more people into the business in order to earn more income, “thus defrauding participants of their property,” the prosecutors alleged. 

When the company was exposed in May 2022 and the executives were arrested, the filpool.io platform had 57,122 members, while bpool.io had 37,015. 

Shenzhen Shikongyun Technology obtained a total of RMB 606,955,718 ($83,185,636) and a total of 62,155,764 coins via these two platforms, the report said.

The prosecutors stated that the case is currently under further investigation. 

Notably, mainland China banned all crypto transactions in September 2021. It is, however, actively working on developing its central bank digital currency (CBDC). 

Hong Kong, meanwhile, aims to become a major, international crypto hub, recently issuing the first licenses to crypto companies under a new regulatory regime.

Hong Kong regulators also work to dispel worries that the city could be impacted by Beijing’s ban, citing the “one country, two systems” principle that allows it to have its own economic system.

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