Chinese cryptocurrency scam ringleaders jailed in US$2.25 billion Ponzi scheme involving PlusToken platform

Court in Yancheng, Jiangsu province, sentences those behind a multinational pyramid scheme to up to 11 years in prison

Size of the PlusToken scam makes it one of the largest uncovered Ponzi schemes in China to have taken advantage of blockchain technology

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Before it went bust, the PlusToken platform’s 2.7 million members contributed approximately 14.8 billion yuan (US$2.25 billion) worth of eight types of cryptocurrencies, including more than 310,000 bitcoin. Illustration: Shutterstock

Published: 7:15pm, 1 Dec 2020Updated: 11:00pm, 1 Dec 2020

A Chinese court has sentenced ringleaders of a multinational cryptocurrency-based pyramid scheme to up to 11 years in prison after they defrauded investors out of 14.8 billion yuan (US$2.25 billion) worth of cryptocurrencies, according to court documents from the eastern province of Jiangsu.

PlusToken, a platform set up by Chen Bo in early 2018, used decentralised ledger technology known as blockchain to attract millions of people who were required to pay their membership fee in cryptocurrencies. The platform offered high investment returns based on the number of members they recruited and investment amounts, according to a criminal ruling published by the Intermediate People’s Court in Yancheng, Jiangsu, in late November.

It was a classic example of a Ponzi scheme that generated returns for early investors by using money from later investors, while no real business was involved. Yet, the size of the PlusToken scam makes it one of the largest uncovered Ponzi schemes in China to have taken advantage of blockchain technology, using cryptocurrencies as a medium.

After PlusToken went bust in mid-2019, and Chinese authorities started chasing its ringleaders domestically and abroad, the price of bitcoin plunged almost 30 per cent from its highest price of the year, to about US$10,000 per coin. On Monday, bitcoin hit an all-time high of US$19,850.11, according to bitcoin price index CoinDesk.

Financial fraud has been rampant in China in recent years. According to the Supreme People’s Court in China, the number of new cases involving illegal fundraising heard by Chinese courts at all levels surged from nearly 6,000 in 2015 to more than 9,000 in 2018.

While the Chinese government has wiped out almost all peer-to-peer lending platforms – hotbeds for scams – and cracked down on cryptocurrency exchanges on the mainland since 2017, the nation’s financial regulators still reported close to 6,000 related criminal cases last year.

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