Promoters of Pu’er Coin have been arrested by the Chinese law enforcement agency for cryptocurrency fraud, where they’ve raised millions of US Dollars from the market.
They have been accused of defrauding 3,000 Chinese investors amounting to $47 million by selling Pu’er Coin, which they claimed was backed by a commodity, Guangdong Daily reports.
The six suspects formed a firm named PEB located in Shenzhen, and began operation in January 2017 issuing a blockchain-powered token dubbed Pu’er Coin.
The project’s website says buyers of the token are entitled to hold a contract representing ownership of a certain amount of the Pu’er Tibetan tea the firm has in stock, which it claims to be worth billions of dollars.
While the token can be subsequently exchanged in a secondary market called Jubi.com, another website claims the contract can also bring a 12 percent annual return if investors choose to lock their funds for 12 months.
According to the police investigation, though the firm had only a “very limited amount of the tea in stock,” it promised high short-term returns to investors in social media promotions and roadshows at high-end hotels.
The project succeeded in attracting a significant number of investors by manipulating the secondary market with its own funds to drive up the token price twentyfold over the course of 2017, police report says.
Before the latest crackdown, the firm had received a warning and a fine in April this year from China’s State Administration for Market Regulation.
Then, PEB, the company behind Pu’er Coin, was fined $20 million for disseminating false claims in an advertisement that touted its supposedly large stockpiles of the Tibetan tea to back the token.
The rise of cryptocurrency fraud
Illegal fund raising has taken a new dimension since bitcoin boom and the emergence of other cryptocurrencies a year ago.
The crypto market isn’t only hit by cryptocurrency fraud, they have also been prone to cyber-related attacks where millions of US Dollars were stolen. CoinCkeck was a classical case of massive cryptocurrency fraud
It’d be recalled that CoinDesk earlier reported a case of cryptocurrency pyramid scheme founders that raised $13 million from over 13,000 people.
Cryptocurrency fraud and defective crypto ads at a time prompted Facebook, twitter and Google to suspend cryptocurrency ads temporarily.