Chizhou police arrested eight people from different provinces in December and froze assets worth millions of dollars.
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Beijing’s crackdown on cryptocurrencies continued into the new year as Chinese police froze nearly 6 million yuan ($1 million) worth of cryptocurrency and arrested eight people in connection with it.
According to a report published in Nikkei Asia, the Chizhou public security bureau has discovered a crypto carpet carpet-pulling fraud that could be worth 50 million yuan ($7.8 million). Police began an investigation after an investor lost 590,000 yuan worth of cryptocurrency last June. Traces of the investigation lead to eight people living in different provinces. Police also seized luxury cars, villas and other expensive items from the accused allegedly purchased with fraudulent funds.
The fraudulent DeFi scheme lured investors with promises of high returns by swapping liquidity. However, after the investors put their money in, the scammers laundered the money from anonymous groups and took all the money. Chizhou Police said:
“After investigation and analysis by the police task force, we found that this case is a typical case of illegal acquisition of virtual currency using blockchain technology.”
Carpet pulling has become one of the most popular scams in the decentralized finance (DeFi) space, as it is relatively easier. According to Chainalysis data, investors have lost more than $2.8 billion to drag the carpet in 2021. These types of scams often attract investors that promise high returns and once the pool has had enough. capital, the scammers will run away with all the money. The Chainalysis report states: “Rug-pugs have emerged as a scam by the DeFi ecosystem, accounting for 37% of total crypto scam revenue in 2021, compared with just 1% in 2020. ”
Related: CertiK identifies Arbix Finance as a pulling rug, warns users to stay away
While the use of cryptocurrencies for criminal activities is estimated to account for about 1% of the total circulating supply, the increasing scams in the DeFi space have affected investor confidence. . However, it is also important to note that these scams often target end-user vulnerabilities rather than an inherent problem with cryptocurrency technology. This is evident from the leading 15’s largest carpet pulling data which shows that most of the major scams have happened with new tokens that promise high returns.
