Prosecutors accused defendant Lai Mouhang and his accomplices of creating a 600 million yuan (about $82.2 million) cryptocurrency pyramid scheme.
According to the indictment, Lai Mouhang and Lai Moujun founded Shenzhen Space-Time Cloud Technology in 2018, and then recruited the other defendants, Hu and Liang, as well.
In 2019, Lai Mowhan created a website for the organization and an account on WeChat, a popular Chinese messaging app.
Through social media, Defendants told potential investors about distributed ledger technology (DLT). Along with this, the infiltrators promoted a model that mimicked Filecoin’s economic structure.
Through this mechanism, miners who successfully created new blocks allegedly received Filecoin coins. For this purpose, the organizers of the scheme have created the Filpool platform within the Space-Time Cloud Company.
The firm’s founders sold storage servers and cloud computing resources to investors, and promised investors various perks and steady income.
Law enforcement officials said Space-Time Cloud Company launched another platform in 2021 using multi-level marketing (MLM).
By 2022, the Filpool platform had attracted 57,122 members across 16 tiers, generating significant cryptocurrency revenue for the platform. The BPool platform has gained 37,015 participants across 11 levels.
The prosecutor’s office alleges that the defendants committed fraudulent acts that violated economic and public order.
The founders of Shenzhen Space-Time Cloud violated criminal laws because they lured investors with promises of profits and used a hierarchical discount system. The prosecutor’s office continues to investigate Lai Mouhan and his accomplices.
In 2021, Chinese law enforcers detained 31 suspected fraudulent pyramid scheme organizers who also promised profits from Filecoin mining.
Also last year, authorities in China’s Zhejiang province increased fines for violating a ban on cryptocurrency mining.