Virtual currency scam using the name of Cambodian prince: under the banner of "digital bank", it is actually a pyramid scheme, and the police filed a case for fraud

Source: 21 Finance

Intern Wu Shuang, reporter Zhou Yanyan

Since 2017, China's financial regulatory authorities, from the central to the local level, have been working together to rectify virtual currencies and are committed to eliminating the soil for the survival of virtual currencies in China. However, as the concept of digital currency becomes more popular, a few "slippery fish" are lurking in the dark and making a comeback, stirring up trouble.

A reporter from 21st Century Business Herald noticed that a virtual currency called GIB became popular among the people in Jiangsu and Zhejiang in 2019, and gradually spread outside the Yangtze River Delta and even overseas. This platform, under the banner of foreign exchange trading, asset allocation, and digital banking, opened multiple online investment courses to trick investors into investing their money. In the end, not only was the investment income unable to be realized, but the investors' principal could not be withdrawn.

Recently, among the nearly 100 investors contacted by the reporter, 11 have reported the case to the police. At the end of 2020, in Guangxi and other places, the police opened an investigation into the GIB virtual currency for fraud.

A "Notice of Case Filing" dated November 25, 2020, shown to reporters by several investors, shows that the Gangbei Branch of the Guigang City Public Security Bureau of Guangxi believes that the case falls within its jurisdiction and criminal responsibility needs to be pursued. Now, in accordance with Article 112 of the Criminal Procedure Law of the People's Republic of China, a fraud case has been filed for investigation.

So, what kind of platform is this GIB virtual currency? How does it grab funds from investors?

Foreign exchange platforms that cannot withdraw cash

GIB (Global Investment Bank) stands for “Global Investment Digital Bank” in Chinese. In the online course open to investors, the “instructor” described it as the world’s first blockchain-based company and a digital asset banking platform.

The "lecturer" said that if you invest $15,000-49,999, you can get a monthly interest income of 15%. The more you invest, the higher the interest. If you invest more than $100,000, you can get a monthly interest income of 25%. You can also withdraw 5% of the monthly income and put it into your original stock wallet. "GIB Bank is expected to be listed on the Nasdaq in the United States within two years, and the stock value will increase by tens or hundreds of times by then."

21st Century Business Herald reporters contacted nearly 100 GIB investors, most of whom firmly believed they were involved in a scam. These investors are distributed across the country, with a large number of people from Zhejiang, Guangxi, and Heilongjiang. In addition, there are also overseas investors from Singapore and Malaysia, most of whom are aged between 20 and 40.

The reporter conducted an in-depth investigation of 25 of the investors and found that 11 investors from Hebei, Guangxi and Heilongjiang have reported to the police, but there has been no new progress for the time being; among them, the highest investment amount reached 900,000 yuan, and most people invested less than 100,000 yuan. Most of them invested because of the recommendation and introduction of relatives and friends, and many of them also have 2-5 acquaintances around them who have invested.

Lin Ruhai (pseudonym) is from Wenzhou, Zhejiang, and is the owner of an advertising and media company. At the end of 2019, he invested his savings of 300,000 yuan in an online platform called GCG (the predecessor of GIB).

Lin Ruhai learned about GCG through a friend in May 2019. The friend told him that it was a foreign exchange asset management platform and that the investment could be recovered in three months. At first, he was not sure and hesitated for a few months. Only after seeing his friend successfully withdrawing money from July to October of that year did he fully believe it.

On November 21, 2019, Lin Ruhai registered an account and invested $15,000. Within a month, he added another $30,000. Recalling his feelings at the time of the additional investment, he said: "I just thought, since I have already invested 100,000 yuan, I might as well seize this 'financial opportunity' and try my luck again."

After that, Lin Ruhai withdrew 50,000 yuan in cash, but he used the money to do "asset allocation" on the same platform, and only about 8,000 yuan actually arrived. In May 2020, GCG issued an announcement that it would switch to GIB digital bank. The "online" promised him that "after opening GIB, the money in GCG can be withdrawn." So Lin Ruhai spent another $2,000 to open a GIB bank account.

Lu Guining (pseudonym) from Nanning, Guangxi, and his girlfriend invested about 150,000 yuan in GCG. In May 2020, after he opened GIB, he felt that he had been cheated. "GIB issued an announcement saying that the principal could not be withdrawn and would be released in three years. Only by continuing to invest can you continue to withdraw cash. The more you invest, the more principal you will release."

He did not continue to invest money. At the beginning, he could withdraw about 1,000 yuan a month, but he could not withdraw it since October 2020. So far, he has withdrawn more than 40,000 yuan, and the rest cannot be withdrawn.

A reporter from 21st Century Business Herald learned that after the outbreak of the epidemic in 2020, the two platforms, GCG and GIB, delayed withdrawals due to the epidemic. Now the withdrawal channel has been closed, and GIB requires members to top up $500, and only before January 18, 2021, can they continue to withdraw cash.

The so-called "hedge" is a pyramid scheme to attract people to invest

Lin Ruhai told reporters that the friend who introduced him to invest in GCG also invested two to three million yuan. This friend also helped to attract 20 to 30 new people to the platform, all of whom were relatives and friends of his family. The total amount of funds invested reached tens of millions.

Lin Ruhai also mentioned that he saw a village director in a WeChat group encouraging the elderly in the village to invest in GCG/GIB. The elderly in the village directly gave 20,000 to 30,000 yuan of pension to the village director for investment. Since Lin Ruhai kept speaking out in the group after discovering that he was deceived, he has been kicked out of the group.

Mr. Lin told reporters that he has always received "static income", that is, the return on his own investment. There is also a kind of "dynamic income", which is to "do the market" and attract people to invest. "I haven't seen any returns on my own money, how can I attract others to join? This is simply a scam."

In addition to "dynamic returns", there is another name for the GIB investment scam of luring people to do market work - "hedge".

In the financial field, "hedging" refers to an investment that deliberately reduces the risk of another investment. It is a technique that reduces business risk while still making a profit from the investment. However, in GIB's terminology, "hedging" means using the money of new investors to exchange for the profits of old investors.

Another person who was asked to "do marketing" and recruit people was Zhao Yu (pseudonym) from Harbin, Heilongjiang. Introduced by her cousin, she invested nearly 600,000 yuan in GCG in April 2019.

Zhao Yu had always used banks to manage her finances because she didn't know much about investment and financial management. Her cousin has more than 30 years of experience in the financial industry. She used to be the president of a branch of a joint-stock bank and is currently a financial advisor at a third-party wealth management institution. With many years of experience and the fact that she is a relative, Zhao Yu believed her cousin's investment advice without hesitation and chose the so-called "profitable investment".

My cousin introduced many "advantages" of GCG, such as "top Russian traders", "dual-turbo mode", "A1 and A2 warehouses, she will make a profit as long as either warehouse is profitable", and most importantly, "the investment can be recovered in one month, and the principal can be withdrawn at any time". These two conditions attracted her.

The cousin also told her that if she was worried, she could apply for a draft from the Bank of China. If something went wrong, she could take the draft to withdraw the principal, but the draft had to be taken from the Phnom Penh Bank in Cambodia. "It's so far away, so I didn't apply," Zhao Yu said.

Later, Zhao Yu transferred 100,000 yuan to her cousin through a bank card, and made two additional investments within a month, with the total investment reaching 576,000 yuan. 300,000 yuan of this money was her own family savings, and the rest was the pension her mother gave her for safekeeping. Her cousin gave her four account information, through which she could check her own profits.

After entering the investor WeChat group, Zhao Yu felt uncomfortable with the slogans of "getting rich overnight" that were heard every day in the group. However, the two real-time transaction and cash withdrawal videos posted in the group also made her feel at ease.

Until mid-2019, domestic and foreign media reported that Qiu Fuhao, the actual controller of the GCG platform, was arrested in Phnom Penh, Cambodia for "intentional fraud" for impersonating the name of Cambodian Prime Minister Prince Hun Sen and using the name of the Cambodian National Central Bank for false propaganda. Zhao Yu did not sleep all night. After just one month of investment, she found out that she had been cheated.

According to a report by the Securities Times in June 2019, on the morning of May 17, Darren Yaw, a core figure of the GCG Financial Group, and his wife were arrested by the police. The Cambodian National Police General Department held an emergency meeting to launch a criminal investigation into GCG GCG's false advertising in the name of Hun Sen, and a joint working group composed of the National Police General Department, the National Bank, the Phnom Penh Municipal Police Department and the Cambodian Securities Commission sealed the group's office in Phnom Penh. The Securities Times said that the pyramid scheme attracted people to deposit money, claiming that the annual income could exceed 10 million US dollars. With more and more people participating, GCG GCG's capital pool has become larger and larger, forming a "Ponzi scheme", constantly using the money of investors who entered the market later to pay the investors in front. Once the platform has a run, the principal of all investors will be buried. In addition, the scam also falsely claimed to cooperate with many large banks, including the Phnom Penh Bank of China branch in Cambodia, which claimed to be able to handle guaranteed bills of exchange.

Zhao Yu went to the Bank of China to inquire whether the bill of exchange could still be processed. The Bank of China said that it had never cooperated with GCG and there was no such thing as a bill of exchange.

She called her cousin to inquire about the situation, and her cousin said it was retaliation from a competitor. She proposed to take the money back, but her cousin said it was not available now and needed to be "hedged." "Hedging" means attracting new investors, and only when new investors invest can the old people's money be withdrawn.

At this point, Zhao Yu was sure that this was a scam and planned to call the police. However, her cousin did not stand on the same side as her, but threatened that if she called the police, her account would be blocked and all the money she had invested would not be recovered.

Due to her family's feelings, she delayed reporting the case to the police for a long time. Zhao Yu gradually began to understand the tricks of GCG. It turned out that the "US dollars" she bought were not real US dollars, but "US dollar points". These virtual US dollar points were allocated by GCG to her cousin and her cousin's superior Liu. Zhao Yu said, "Liu is the biggest boss in Heilongjiang, and he has 500 to 600 investors under him." They rarely invest themselves, and they mainly "do marketing."

Another incident also made Zhao Yu begin to doubt the authenticity of the "US dollars". During the Chinese Valentine's Day in 2019, the group owner began to give "US dollars" to new investors in the WeChat group in order to encourage investment. He gave 7 people 777 US dollars each. "If it was real US dollars, how could it be given away casually? Only US dollar points can be given away casually."

Zhao Yu said that Liu was a friend of her cousin. He claimed to be a senior foreign exchange expert, but was actually just an unemployed person.

In the group, Zhao Yu watched them continue to "brainwash" investors, and many investors continued to be deceived. After she stood up and said a few words, she was kicked out of the WeChat group.

Now, Zhao Yu's account shows more than 3 million RMB, but she can't withdraw a penny. She sold her account in the group and offered to give all the money in the account to the buyer, just to get back the principal, or even a little less, but no one responded.

In May 2020, GCG proposed that each account could withdraw the money by opening a GIB digital bank for $500. Zhao Yu believed that this was just a trick by GCG to continue cheating for a while, and "I will never be fooled again."

Zhao Yu consulted a lawyer, who said that this was a criminal offense and suggested calling the police directly. On August 13, 2020, Zhao Yu called the police, but the police have not filed a case. Zhao Yu told reporters: "It is very difficult to protect my rights, but I will persist."

Southeast Asian investors: GIB is more complicated than you think

A Southeast Asian investor who researched GIB said that the GIB/GCG scam can be traced back to 2009. From STAR FOREX ENTERPRISE in 2009, to MERCXYZ ONE in 2013, GSM FINANCIAL GROUP in 2014, to GCG ASIA in 2018, and GIB in 2020, the mastermind behind all of these scams is DARREN YAW.

The video provided by the investor shows that many scenes in the GIB promotional video were plagiarized. For example, the scene of the audience applauding at the press conference on August 22, 2020 was a scene in a theater in Moscow on May 21, 2013.

Another Malaysian investor told the 21st Century Business Herald reporter: "I did make money from GCG."

He said: "GCG started planning at the end of 2018 and was officially launched in January 2019. Cash withdrawals were available at any time in the first three months, and the profit margin was very high, even reaching 80%. The group of investors did make money in the first three months."

His sister started investing in January 2019 and made $50,000 to $60,000, and even his mother-in-law made a few thousand dollars. "It feels great to get money every week."

He started investing in April 2019, and since then, cashing out has not been as easy as before. He changed his "group" (the upper company), and after the upper company applied to the company's senior management, he could receive money from the "company" every week. "It is important to follow the right upper company. As long as the upper company is willing to help you report to the upper level, you can get the money."

In 2020, GCG was converted to GIB, and he spent $2,000 to convert his four accounts to digital banking, $500 for each account. Two months later, he received $4,000. "Net profit of $2,000."

He told the reporter that this is a Ponzi scheme, and those who enter first will make money, while those who enter later will lose money. "If you transfer to a digital bank later, each account will have $1,500, and you may not get the money. I will not invest in it anymore."

The story of "getting rich overnight" is still being told

Yan Fang (pseudonym), who was contacted by 21st Century Business Herald reporters, is one of the investors and one of the leaders in promoting GIB. Her main business is running a clothing store in Shanghai, and now she regards GIB as her sideline. She insisted: "I have been investing money in the clothing store but have not seen any returns, and GIB has been helping me make money." She has invested a large amount of money since GIB was founded, and is also responsible for teaching other investors in Taizhou, Zhejiang, "because the market there is relatively large, and the team is also relatively large, with dozens of people."

GIB mainly recruits new investors through viral communication. Yan Fang is about 40 years old. She told 21st Century Business Herald that for every new investor recommended, the recommender will receive a commission of 100% of the new investor's interest. If the two investors invest the same amount, the recommender will receive double the interest every month and get twice the dynamic income. The second person will receive 50%, and if the recommender recommends more than 2 people, he or she can also receive 15% of the commission of the superior recommender.

Regarding the return on investment, Yan Fang said: "Investing $500-7499, you can enjoy a monthly interest income of 7%; investing $7500-14999, you can enjoy a monthly interest income of 10%; investing $15000-49999, you can enjoy a monthly interest income of 15%; investing $50000-99999, you can enjoy a monthly interest income of 20%; investing $100,000 or more, you can enjoy a monthly interest income of 25%."

Yan Fang told the 21st Century Business Herald reporter: "If you invest $15,000 (about 100,000 RMB) and get a monthly interest income of 15%, that is, 15,000 RMB interest per month, you will make a profit of 500 RMB per day. You can withdraw cash every five days, and six times a month."

Yan Fang said that due to her investment in GIB, 2020 was her best year for income. Yan Fang did not disclose her specific investment amount to reporters, only saying "very much, the daily profit income is in the five figures." When asked if she could withdraw cash at any time, Yan Fang insisted that she could withdraw cash smoothly now.

A reporter from 21st Century Business Herald found that although GIB claims to be a "digital finance" institution, it is fraught with doubts.

Question 1: The issued digital currency GUSDT is not recognized by any institution

Yan Fang told the 21st Century Business Herald reporter that the daily interest income will not be fully distributed to investors, only 70% is in current account and can be withdrawn at any time. Of the remaining 30%, 10% is in regular account, converted into GIB's official digital currency GUSDT, with an annual interest of 18%; 10% is invested in the MT5 foreign exchange trading wallet, which will be launched in December and earn 60% per month; 5% is in the equity wallet, which will be used as the original equity after GIB goes public; the remaining 5% is invested in GIB's digital mall, which can be used to buy digital products, houses, and luxury cars.

Gong Hui, a lecturer in financial technology at the University of Westminster, told reporters: "GUSDT issued by GIB has not been recognized by any official organization. Its issuance cost is just a few lines of code on Ethereum. If it can only be circulated on its own APP, it is just a number displayed after the front-end is modified."

Doubt 2: The parent company and actual controller are unknown

Public information shows that GIB's parent company is AFF Multi Finance Group (AFF Multi Finance Group), and the official website shows that "AFF Multi Finance Group was founded by John Joseph Foley in 2020."

However, its internal promotional PPT shows that AFF Australia Technology Diversified Financial Group is not the official name of its parent company. The official name of the NASDAQ-listed company it is talking about is "AFF Holding Group Inc." The search results of the Nevada Business Portal show that AFF Holding Group Inc was registered in Nevada, USA on January 23, 2006.

(Photo source: Nevada Business Portal)

The U.S. Securities and Exchange Commission's official website shows that AFF Holding Group Inc was listed on the OTC market on October 4, 2016 and obtained the OTCQB certificate. Securities traded on OTCQB need to submit the latest financial reports to the SEC or U.S. banking or insurance regulators in accordance with the U.S. Standard Accounting System (GAAP). However, OTCQB does not have corresponding financial or qualitative requirements for trading securities.

Therefore, it is probably too early for the "instructor" to call AFF a "quasi-listed" company in the internal online course provided by investors.

According to its financial report disclosed on August 20, 2020, AFF Holding Group Inc's main business is operating websites and apps, providing hotel review services in Hong Kong, but this service was terminated on May 25, 2018, and it is not operating any business now. Financial data shows that the company had no income in 2018 and 2019, only some administrative expenses, and was in a loss-making state.

The financial report also shows that on June 3, 2020, the company submitted a certificate of amendment to its Articles of Incorporation to the State of Nevada, changing its corporate name to "AFF Holding Group Inc."

(Image source: U.S. Securities and Exchange Commission website)

Multiple pieces of evidence show that AFF is most likely just a shell company with no business.

As for the "founder and chairman of GIB, Attorney John Foley" mentioned by investors, he is also the founder of AFF, but there is no information about this person except the news they paid for.

The stock and financial news website MarketScreener does not mention any connection between Mr. Foley and GIB or AFF, but its other descriptions of Mr. Foley are true.

(Image source: MarketScreener website)

Suspicion 3: The main business is suspected of being illegal

The recording of GIB's internal online course shows that GIB has two major "hematopoietic functions": the first is to use the so-called "5A hedging model" to trade foreign exchange, cryptocurrency, precious metals, stock contracts for difference, and international indices, hedging five at the same time; the second is to use the arbitrage system "AI artificial intelligence quantitative technology" to buy at low prices and sell at high prices in real time for arbitrage.

In this regard, Gong Hui told 21st Century Business Herald: "Chinese law prohibits over-the-counter trading of cryptocurrencies. In 2017, the 94th Notice jointly issued by seven ministries and commissions required that no organization should provide pricing, information intermediary and other services for tokens or "virtual currencies." According to the "Notice on Preventing Risks of Overseas ICO and "Virtual Currency" Transactions" issued by the China Internet Finance Association, if digital currency OTC transactions are organized currency transactions or over-the-counter transactions, such as those generally organized and arranged by intermediaries acting as individuals or organizations, and matched with market makers, guarantors and other services, it is very likely to be identified as a virtual currency trading venue transaction and an act that violates laws and regulations."

As for the AI ​​arbitrage system that it promotes, Gong Hui said: "First of all, AI arbitrage does not mean 100% profit. AI arbitrage also faces risks such as the speed of currency withdrawal, blockchain congestion, and uncertain price increases. In addition, the currency prices of all exchanges are already in a stable state, and the price difference will not be higher than one point. It is very difficult to make money by arbitrage. Finally, in recent years, there have been many platforms that collapsed and ran away under the guise of AI arbitrage systems, such as 'HT arbitrage' and 'Plus Token'. If it is really that profitable, how could so many 'predecessors' collapse and run away?"

(Image source: GIB official website)

In addition, the GIB official website shows that MetaTrader5 is a platform for buying and selling foreign exchange.

Gong Hui said: "Foreign exchange speculation is prohibited in our country. According to Article 45 of my country's Foreign Exchange Management Regulations, if anyone privately buys or sells foreign exchange, buys or sells foreign exchange in disguised form, or illegally introduces the purchase or sale of foreign exchange in large amounts, the foreign exchange management authority shall give a warning, confiscate the illegal gains, and impose a fine of no more than 30% of the illegal amount; if the circumstances are serious, a fine of no less than 30% but no more than the equivalent of the illegal amount shall be imposed; if a crime is constituted, criminal liability shall be pursued in accordance with the law."

Doubt 4: Real license, fake supervision

GIB said it has obtained a total of 17 licenses from nine countries, including the United States, Canada, Dominican Republic, United Kingdom, Switzerland, Thailand, Lithuania, Australia, Malaysia and Laos.

(Image source: GIB official website)

On its official website, GIB only lists the official website of the license grantor, without showing the serial number. GIB is not found in the companies starting with G in FINMA's latest updated list of authorized banks and securities firms, nor in asset management companies.

A check by a reporter from 21st Century Business Herald found that GIB does have three licenses, not 17 as it claimed. They are the Australian Financial Services License (AFSL), the Money Services Business (MSBs) license managed by the U.S. Financial Crimes Enforcement Network (FinCEN), and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Gong Hui said: "Generally speaking, if foreign brokers approved by foreign regulatory authorities want to provide financial services in China, they must first be approved by financial regulatory authorities in accordance with my country's established management principles; second, they must establish a company providing financial services in my country in accordance with the requirements of commercial presence. Therefore, even if GIB holds many foreign licenses, it still cannot conduct related foreign exchange business in my country."

For example, its AFSL license stipulates that it can only engage in financial services business in Australia.

In addition, as investors said, GIB can be said to be the "new vest" of GCG, which was identified as an international fraud group by the Cambodian police.

A press release about GCG on April 29, 2019 mentioned that GCG’s Australian business partner, Mr. John Foley, is the same person as the founder of GIB.

In addition, "Master Qiu" was mentioned in the internal course recording. He often shared knowledge and "good news" with everyone in the group. A reporter from 21st Century Business Herald and Yan Fang confirmed that this person was the boss of the foreign exchange trading platform in which she had previously invested.

Yan Fang said that she started investing in a foreign exchange investment platform in March 2020. "The interest rate was more than 30% in March, and more than 60% in April. The platform was later acquired by GIB." This is exactly the same as the time described by the investor about the transfer of GCG to GIB.

When asked which foreign exchange trading platform she had invested in before, Yan Fang smiled and said, "I won't tell you which one it is. The foreign exchange yield is quite high. No matter what people say, we know that our withdrawals have always been smooth."

Yan Fang also said that after the previous foreign exchange investment platform was acquired by GIB, the invested money was also transferred to GIB.

With so many problems, how did GIB convince investors to hand over their money?

During their investigation, a reporter from 21st Century Business Herald found that GIB/GCG used their network of acquaintances to spread virally among friends and relatives, and most investors said that they invested by directly transferring money to their superiors without any written agreement.

This was also confirmed by Southeast Asian investors. A Malaysian investor told the reporter: "The company was opened by Malaysians, but I can't find their company address here. I don't know the company's bank account number either. The investment was directly transferred to the private bank account of the superior."

In addition, GIB also made full use of paid media to promote its products, publishing PR articles on various platforms with a high degree of consistency in the descriptions. In addition to promoting its products in Chinese media, GIB also implemented an "internationalization" approach, setting up accounts on YouTube and Twitter to publish promotional videos.

In its publicity, GIB gave investors many beautiful and ethereal promises, such as the GIB digital bank card that can be used for global consumption in the future, the "GIB Twin Towers" under construction in Malaysia, the gold mines mined day and night in Australia, and so on.

It is easy to invest, but difficult to withdraw. The investment cycle of GIB is 1 year. It is not easy to get back the principal in advance. If you want to get back the principal within half a year, you need to pay a 30% handling fee. If you want to get back the principal within half a year to a year, you need to pay a 15% handling fee. This unconventional handling fee collection rule has not scared away participants. At present, such investment gambles are still prevalent in hidden corners.

(Author: Intern Wu Shuang, Reporter Zhou Yanyan Editor: Ma Chunyuan)