Beijing’s crackdown on cryptocurrencies continued with the start of the new year: Chinese police froze nearly 6 million yuan ($1 million) worth of cryptocurrency and arrested eight people involved.
According to a report published in Nikkei Asia The Chizhou Public Security Bureau discovered a cryptocurrency scam that could be valued at 50 million yuan ($7.8 million). Police launched an investigation after an investor lost 590,000 yuan worth of cryptocurrency in June last year. The trail of the investigation led to eight people living in different provinces. Police also confiscated luxury cars, villas and other expensive items from the defendants, which were said to have been purchased with the stolen money.
The decentralized finance (DeFi) scam lured investors with promises of huge profits by exchanging liquidity. But still, After the investors handed over their money, the scammers would launder it and take all the funds. Chizhou Public Security said:
“Following investigation and analysis by the police task force, this case was determined to be a typical case of illegal procurement of virtual currency through the use of blockchain technology.”
Carpet thefts have become one of the most common scams in the DeFi space as they are comparatively easier to pull off. According to Chainalysis data, investors lost more than $2.8 billion to rug pulls in 2021. The Chainalysis Report said: “Carpet theft has emerged as the most popular scam in the DeFi ecosystem, accounting for 37% of all cryptocurrency scam revenue in 2021, up from just 1% in 2020.”
While the use of cryptocurrencies for criminal activity is estimated at around 1% of the total supply in circulation, the growing scams in the DeFi space have hurt investor confidence. However, it is also important to note that these scams often exploit end-user vulnerabilities rather than an inherent problem of crypto technology. The 15 biggest scams data shows that most of the biggest scams appeared with new tokens promising high returns.