Preventing illegal fund-raising | Uncovering the cloak of “pseudo-blockchain” and guarding against illegal fund-raising scams of virtual currency

A few days ago, Musk announced the suspension of using Bitcoin to pay for Tesla, which caused a big plunge in the currency circle. Bitcoin fell below $40,000. Many speculators collectively “exploded their positions” and caused concern from all quarters of the society. The wealth accumulation effect of digital currency has made blockchain and virtual currency a hot spot of public concern in recent years. As the scale of encrypted digital currency represented by Bitcoin continues to expand, various scams under the banner of “blockchain” technology are also emerging in an endless stream. .

1. The status quo of illegal fund-raising of virtual currency

From the perspective of the development of the world’s digital asset market, there are more than 1,500 digital currencies in the world. In May 2021, the number of global digital currency exchanges exceeded 12,000, with a total market value of 2.55 trillion U.S. dollars, surpassing the U.S. dollar circulation for the first time. quantity. However, because the current digital currency still has problems such as unclear legal status and insufficient supervision, it has caused criminals to use the anonymity of digital currency to evade supervision and conduct speculation, illegal fundraising and other activities, which seriously threatens the value storage of digital currency. The function also increases the risk of investors encountering illegal fund-raising scams.

On May 1st, my country’s “Regulations on Preventing and Disposing of Illegal Fund Raising” were officially implemented. The regulations clarified the definition, prevention methods, and disposal methods of illegal fund raising, and officially included blockchains and virtual currencies in the gray area under supervision. Scope.

2. Case analysis of illegal fund-raising of virtual currency

Take the “Pu’er coin” huge fund-raising fraud case as an example. In 2018, Shenzhen Pu’er Blockchain Group Co., Ltd. issued virtual currency in the “blockchain + Tibetan tea” model to collect public deposits, causing thousands of investors to be deprived of Defrauding funds of 307 million yuan.

The investigation found that the company claimed through the Internet, social software and other platforms that the “Pu’er coin” it released was a virtual currency secured by massive amounts of Tibetan tea. Every “Pu’er coin” held by investors was With the equivalent physical Tibetan tea as collateral, investors can put “Pu’er coins” on the virtual trading platform “” for trading, and set up servers overseas to earn the difference. However, the investigation found that the company used investors’ investment funds for behind-the-scenes operations of the changes in its buying and selling prices, and once raised the price of “Pu’er coins” from 0.5 yuan to 10 yuan. “P2P platforms illegally absorb public funds.

In order to attract more investors, the company also promised at the press conference to split the “Pu’er coin” held by investors twice, so that the value of the “Pu’er coin” held by investors would be increased by 100 times, and announced that it would add More Tibetan tea as support. In fact, the company only has a small amount of Tibetan tea in stock. In order to conceal people’s eyes, it hired “traders” to increase currency prices in the early stage, allowing investors to taste some sweetness. When a large number of investors entered the market, the company used malicious manipulation of the price trend of the “Pu’er coin” to continuously cash out, resulting in the “Pu’er coin” in the hands of investors being worthless.

Judging from the cases of regulatory disclosures, many illegal fund-raising tricks are currently being refurbished, putting on the “coat” of financial technology, and most of the criminal methods have the following characteristics:

First, it is obvious that it is networked and cross-border. Criminals mostly communicate through the Internet to make payments and funds, which are characterized by a wide range of risks and rapid spread. Some criminals used overseas servers to build websites to actually carry out activities for domestic residents, remotely control and implement illegal activities, and engage in fraudulent activities under the guise of overseas high-quality blockchain project investment quotas, causing more illegal funds to flow overseas, making supervision and tracking difficult .

Second, it is concealed and seductive. The new type of illegal fund-raising uses “blockchain” and other hot concepts to hype, packaged into “high and big” technological innovation projects, misinterprets the national strategic orientation, or uses celebrity platforms to promote it, which is difficult for the general public to distinguish and has strong concealment. At the same time, controlling the price trend of virtual currency through the background, creating the illusion of high profit, setting profit and withdrawal thresholds and other means, has a strong temptation.

Third, there are multiple illegal risks such as pyramid schemes and fraud. Absorb funds by issuing so-called “virtual currency” and “digital assets”, infringing on the legitimate rights and interests of the public. This type of activity is not really based on blockchain technology, but is the reality of illegal fundraising, pyramid schemes, and fraud by hyping the concept of blockchain. (Pros) It is a bait to attract the public to invest funds and to induce investors to develop personnel to join. The essence is still a Ponzi scheme of “borrowing the new to return the old”.

3. Countermeasures for illegal fund-raising in virtual currencies

For such illegal fund-raising frauds, we should remain rational, strengthen risk prevention awareness, and consciously resist illegal financial activities related to token issuance and “virtual currency”. The main strategies include:

The first is to keep your eyes open and look at blockchain technology and digital currency rationally. Blockchain is a new application mode of computer technology such as distributed data storage, point-to-point transmission, consensus mechanism, and encryption algorithm. Digital currency is usually defined as encrypted currency in digital form, which can be divided into two categories according to the issuing organization: legal digital currency and private digital currency. Legal digital currency is issued by the central bank and has sovereignty and legal compensation; private digital currency such as Bitcoin and Libra can be circulated or cleared in some markets. However, for some “financial innovations” that use “blockchain” and “virtual currency” as gimmicks, such as some registered overseas ICO projects and virtual currency trading platforms, they are actually just “borrowing new and repaying old” Ponzi schemes. Capital operation is difficult to maintain for a long time. Consumers should keep their eyes open, see through the traps behind these “financial innovations,” and don’t blindly believe in the promises that will eventually cause their own property to suffer.

The second is to establish risk awareness and establish a correct investment philosophy. Investment is often accompanied by risks. If you want high returns, you must bear high risks. Consumers should establish the correct investment philosophy, do not believe in the “myth” of “getting rich overnight”, pay attention to learning financial and investment-related knowledge daily, correctly and objectively evaluate their own risk tolerance, and choose investment methods and investments that meet their own risk tolerance Channels, and consult with professional wealth management consultants in a timely manner. Reasonably control the amount of investment, maintain a good attitude, and invest rationally.

The third is not to follow, not blindly, and not fall into the trap of “Celebrity Platform”. The current celebrity platform is the habit of many “cheaters in the blockchain”. Because of their lack of strength, they can only rely on celebrities to “support the scene”, or use “Silicon Valley investors for N years” and “Wall Street partners for N years.” “Project to build an “all-star” team, allowing investors to ignore the qualifications and risks of the project itself. Therefore, investors also need to be calm, and not easily equate celebrity effects with good projects.

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