Square dance aunties also "mining", unexpected power outage reveals 2 billion yuan "mining machine" scam

Zhao Hong, 51, is an employee of a public institution in Xingtai, Hebei Province, and has a stable job. She never thought that the "blockchain mining machine" business, which she pinned her dream of getting rich on, would become a bubble overnight - although she still does not understand the true meaning of blockchain and "mining".

The local police found that from October 2018 to February 2019, Henan Lianxin Technology Co., Ltd. (hereinafter referred to as "Lianxin Company") sold more than 300,000 Snail Star servers (commonly known as "mining machines") to thousands of people, with a total amount of 2 billion yuan involved. Zhao Hong was one of the victims.

All the information shows that this is a well-planned money-making scam. Lianxin Company is now deserted.

Prequel

The first time Zhao Hong heard about Lianxin Company was through the recommendation of Zhang Jie, a friend she had known for many years.

Zhang Jie is a salesperson at Lianxin Company, but she said she did not understand blockchain. The company she applied for at the time was not Lianxin Company, but Henan Antai Zhonghe Property Rights Transaction Consulting Group Co., Ltd. (hereinafter referred to as "Antai Company").

A reporter from Yicai Global 1℃ found that Lianxin is a wholly-owned subsidiary of Antai. The legal representative of Antai is a young man named Huo Dong, who holds 80% of the company's shares. The remaining 20% ​​of Antai's shares are held by Anhui Wanguo Agriculture Co., Ltd. and Anhui Guotai Zhonghe Small and Medium Enterprise Economic Information Consulting Co., Ltd.

Tianyancha data shows that Huo Dong owns a total of 18 companies, including Henan Antai Zhonghe Property Rights Transaction Consulting Group Co., Ltd., Henan Lianxiang Technology Co., Ltd. and Bitmain (Shenzhen) Blockchain Co., Ltd. (hereinafter referred to as "Shenzhen Bitmain").

A blockchain practitioner who had business dealings with Huo Dong told 1℃ reporters that Huo Dong's hometown is in Anhui and Yafei Electrical Appliance Sales Company was the first company he founded. When investment guarantee companies were popular in the past few years, he also invested in them but eventually owed a lot of debts.

In February 2017, Huo Dong initiated the establishment of Antai Company, whose initial main business was "debt relief". The so-called "debt relief" is a method of handling private debts and credits that has emerged in recent years. The normal way is to help customers deal with bad debts by acquiring creditor's rights. The profit of "debt relief" companies mainly comes from the price difference or handling fees of acquired creditor's rights. However, 1℃ reporters found that Antai's "debt relief" model has a deep Ponzi scheme color.

A debt transfer contract signed between Antai Company and its clients shows that Ms. Zhang transferred a total of 60,000 yuan of debt to Antai Company, and Antai Company charged Ms. Zhang two fees, one is a service fee, which is 10% of the total amount of the debt, that is, 6,000 yuan; the other is an advance payment equal to the total amount of the debt, that is, Ms. Zhang paid Antai Company an additional 60,000 yuan advance payment while transferring the 60,000 yuan debt to Antai Company. Antai Company promised to return 10,000 yuan in cash to Ms. Zhang every month in the next 12 months, for a total of 120,000 yuan. Through this contract, it can be found that if the debt can be successfully recovered in full, Antai Company can obtain 10% of the total debt. However, the information from multiple investigations by 1℃ reporters shows that the probability of recovering the debt in full is extremely small, and charging only a 10% handling fee is basically a loss-making business. Occupying "advance payment" may be the core interest point of this model.

"This 'debt relief' model of Antai Company may have huge hidden dangers from the beginning." Zhang Changtong, a lawyer at Shanghai Xieli (Zhengzhou) Law Firm who has long been engaged in investment and financing research, said that as the total amount of debt increases, the amount of funds that Antai Company needs to repay every month will also increase exponentially. Once Antai Company's own capital-making ability is insufficient, it will inevitably cause the subsequent return of funds to fail to keep up, ultimately leading to a break in the capital chain.

Zhang Jie said that the reason she went to work at Antai was to "relieve debt": she had put her money in a local investment guarantee company to earn interest, and later the guarantee company went bankrupt, and the money became an uncollectible bad debt. She heard that Antai could help "relieve debt", so she went to consult. Later, after she handed over her debt contract and the corresponding funds required to Antai, she was worried that the latter would run away, so she simply quit her original job and applied for a job at Antai, becoming a salesperson for the company.

Several salesmen who used to work for Antai Company confirmed to 1℃ reporters that after April 2018, Antai Company's "debt relief" business had basically stagnated, and Huo Dong began to look for his new business.

In October 2018, Antai invested in and established a wholly-owned subsidiary, Lianxin, a "blockchain company" that claims to issue virtual currencies and sell mining machines. Salespeople from Antai, such as Zhang Jie, also became salespeople for Lianxin.

Appearance

Huo Dong’s “blockchain” project debuted in a very high-profile manner.

On October 29, 2018, when the global blockchain industry was in a trough and the price of Bitcoin (BTC) plummeted from its peak of $19,565.5 per coin, the "2018 Central Plains Silicon Valley First (International) Innovation and Technology Festival and the World's Only Storage Application Ecosystem CAI R&D Launch Conference" was held in Zhengzhou.

Unlike many blockchain industry conferences where most of the participants are people born in the 1980s and 1990s, most of the participants at Lianxin Company’s press conference were middle-aged people, many of whom were “debt relief” clients of Antai Company.

As a salesperson of Lianxin Company, Zhang Jie attended the meeting that day. She said that the actual operator of this meeting was Huo Dong.

On that day, Huo Dong introduced the protagonist of the day, the "Snail Interstellar Miner", to hundreds of participants at the scene. From the appearance, this "blockchain mining machine" is similar in shape and size to the host of a desktop computer used in daily life. It is equipped with an Intel quad-core processor and has 2GB of running memory. The head of the chassis is a few jacks for network cables, and the back is a fan for heat dissipation. A local mining machine developer told 1℃ reporters that they had also disassembled and analyzed the machine. According to their experience, the actual production cost of this "mining machine" priced at more than 5,800 yuan should be between 600 and 800 yuan at the time.

According to reports, this mining machine is equivalent to the "Bitcoin mining machine" 10 years ago, and has the function of "one machine dual mining", which can mine "CAI" and "Filecoin" at the same time. CAI is the virtual currency of Lianxin Company, and Filecoin is the token of IPFS, which is an Internet underlying protocol recognized by many blockchain practitioners.

Huo Dong's remarks at the meeting that day made many participants become investors in the "Snail Star Miner" on the spot: 10 years ago, a Bitcoin mining machine could mine 375 Bitcoins a day, equivalent to a daily income of 200,000 yuan, but many people were indifferent. Now, the opportunity of the "Snail Star Miner" is in front of you. If you seize it, you can realize a return on investment in two months. Moreover, the more mining machines you buy, the more coins each machine can mine every day.

Many investors confirmed to 1℃ reporters that one of the reasons they were willing to pay for the mining machine was not because of CAI, but because of Filecoin. Lianxin Company and Huo Dong said during the promotion that after Filecoin goes online, investors can dynamically switch to the "Snail Interstellar Miner" based on the principle of maximizing profits. But later facts proved that until Lianxin Company went bankrupt, no user mined a Filecoin.

Liu Jiang from Zhumadian also attended the press conference. "It felt quite formal and powerful to me at the time." In an interview with 1℃ reporter, he said that two things impressed him most that day: one was that Hurun Report Chairman Rupert Hoogewerf was present in person; the other was the organizer, Central Plains Silicon Valley Innovation Technology Industrial Park, listed on the exhibition board at the venue.

Several Lianxin salesmen who attended the meeting confirmed the above information to 1℃ reporters. 1℃ reporters tried to verify the relevant information with Shanghai Hurun Report Investment Management Consulting Co., Ltd., but no response was received as of press time.

According to Lianxin Company, the Central Plains Silicon Valley Innovation Technology Industrial Park is planned to be located in Baisha Town, Zhongmu County, Zhengzhou City, with a total area of ​​200 acres and a total planned investment of 10 billion yuan. After completion, it will be a new blockchain industrial park integrating AI intelligence, blockchain, big data, and the Internet.

However, several officials of Baisha Town said in an interview with 1℃ reporters that there is no so-called "Zhongyuan Silicon Valley Innovation Technology Industrial Park" in the area, and they have never contacted anyone about the so-called "Blockchain Industrial Park". Moreover, Baisha Town was already under the jurisdiction of Zhengdong New District as early as 2014 and no longer belongs to Zhongmou County. 1℃ reporters also failed to obtain more detailed information about the "Zhongyuan Silicon Valley Innovation Technology Industrial Park" from public channels.

dream

Zhao Hong, Liu Jiang and others did not know what blockchain and CAI were before, but they all became investors of Lianxin Company.

"In third- and fourth-tier cities like Xingtai, there are really too few channels worth investing in. Apart from putting money in the bank and earning low interest rates, there are really no investment products." Zhao Hong said that in fact, residents of third- and fourth-tier cities also have great investment capabilities, but have always lacked suitable investment channels.

A salesperson from Lianxin Company calculated for Liu Jiang: one "Snail Star Miner" can produce 47 CAI per day; 100 units can produce 7,000 CAI per day; 1,000 units can produce 80,000 CAI per day. Under the guidance of the salesperson, he logged into a virtual currency exchange called "AT" and found that the price of one CAI was 1.40 yuan that day.

"If I have 100 mining machines, my daily income will be 9,800 yuan, and my monthly income will be 294,000 yuan!" After some calculations, the excited Liu Jiang first tried to buy more than 10 mining machines. Later, seeing the CAI price rising every day, he spent more than 500,000 yuan to buy 100 "Snail Interstellar Mining Machines".

Zhao Hong, who was more cautious than Liu Jiang, chose to wait and see at first, but when she saw the CAI price on the "AT" exchange rise from 0.5 yuan per coin to 1.4 yuan and 2 yuan, she finally couldn't hold back and bought 40 mining machines on December 29, 2018, introduced by Zhang Jie. Zhang Jie herself also spent money to buy 70 mining machines, and even borrowed some money from her sister.

In the end, Zhang Jie sold more than 200 mining machines to her relatives and friends.

Lianxin Company also launched a very attractive agent policy: paying a deposit of 100,000 yuan, you can become an agent, and agents can get a 10% commission for each machine sold. This move accelerated the sales of "Snail Star Miner". Some mining machine buyers saw the profitability and began to become agents. On the one hand, they recommended the mining machines to their friends; on the other hand, they began to use this 10% price advantage to stock up more mining machines.

"The agent with the most mining machines has stockpiled more than 10,000 mining machines," said Liu Jiang.

A large number of investors from second- and third-tier cities in Henan, Anhui, Hebei, Hubei and other places have purchased mining machines in an attempt to take advantage of the rising CAI prices. Many of them are middle-aged women who can only dance in the square.

A sales statistics table of the Central Plains Silicon Valley Hefei Operation Center shows that in December 2018 alone, the operation center completed the sale of 13,747 mining machines with sales of more than 73 million yuan.

After the incident was exposed, some investors conducted a preliminary statistics on the number of mining machines purchased and found that one person actually bought more than 20,000 mining machines, while others bought hundreds or dozens of them, with a total of more than 300,000 machines. Calculated at 5,875 yuan per machine, the total amount involved in the case is about 2 billion yuan.

Zhao Hong was very happy watching the CAI price rising every day. She even began to dream that when she mined 10 million CAI coins, she would sell all of them.

"At that time, I thought that one coin was 2 yuan, and 10 million coins would be 20 million yuan, enough for me to spend for the rest of my life." However, her dream was awakened by an unexpected power outage, which made her feel a little uneasy.

At first, in order to mine more CAI coins as quickly as possible, she specially installed a gigabit bandwidth network and modified the circuit. One day, the entire community suddenly lost power for more than 10 hours. She was very anxious, worried that it would affect the number of CAI coins mined. Unexpectedly, when she checked the background the next day, she found that the number of CAI coins had still increased.

"How can we still mine when the power is off? Could it be that these coins are not mined, but automatically allocated by the background?" Suspicious, Zhao Hong conducted another experiment. She turned off the power of all the mining machines and found that the daily growth of CAI coins did not stop due to the power outage. She finally began to realize that the so-called mining of CAI by mining machines may be just a gimmick of Lianxin Company.

Several salesmen from Lianxin Company also confirmed to 1℃ reporters that they had the same discovery as Zhao Hong.

After that, Zhao Hong began to place sell orders for her CAI, but she soon discovered that, except for a few scattered orders, there were no large buy orders on the entire "AT" exchange. She only sold more than 10,000 yuan of CAI coins until the "AT" exchange was shut down.

In February 2019, two announcements posted by the "AT" Exchange and Lianxin Company respectively exacerbated Zhao Hong's concerns.

On February 14, the "AT" exchange announced that due to the platform being attacked by hackers, it decided to temporarily suspend all withdrawal operations and freeze related transactions for 3 months until all technical problems were eliminated.

On February 17, Lianxin announced that the company held a US roadshow on February 7, 2019, San Francisco time, and was favored by many Silicon Valley high-tech companies and venture capital institutions. It decided to move its headquarters to Silicon Valley, San Francisco, and promised that "US Silicon Valley technology companies" would recycle CAI coins at market prices...

Zhao Hong had a bad feeling.

At the same time, Liu Jiang and others also found that the "AT" exchange seemed to have a very complicated relationship with Lianxin Company. According to information from Lianxin Company, the "AT" exchange was initiated and established by the Singapore Anthay Foundation. Zhaopin.com information shows that the Singapore Anthay Foundation is one of the initiators of Shenzhen Bitmain, whose controlling shareholder and legal representative is Huo Dong.

What is even more worrying is that Zhang Jie and others who were also paying attention to the announcement also found that dozens of senior executives of Lianxin Company could not be contacted.

Foam

Liu Jiang discovered that the price of millions of CAI coins lying quietly in his "AT" exchange account began to plummet from 2 yuan at its peak to 7 cents, and eventually turned into a string of worthless numbers.

Investors of Lianxin Company, awakened from their dreams, reported the case to the public security organs.

A person in charge of the Publicity Department of Zhengzhou Municipal Public Security Bureau confirmed to 1℃ reporter that the case is currently under investigation. As of press time, 1℃ reporter has not been able to obtain more detailed information on this.

An observer who has been engaged in blockchain investment for a long time sorted out the operation methods of this case to 1℃ reporter: Huo Dong and others first sold the "Snail Interstellar Miner" with a cost of hundreds of yuan to investors at a high price by 100% controlling Lianxin Company; then they manipulated the rise and fall of CAI coin prices through the only trading venue "AT" exchange, constantly attracting investors who did not understand blockchain investment to enter the market; finally, they suddenly closed the transaction and left with the money. In the end, they completed the harvest of 2 billion yuan of wealth in just 4 months.

At the same time, the actions of Huo Dong and others in initiating the establishment of Shenzhen Bitmain may also involve trademark infringement and misleading deception.

Industrial and commercial data show that the owner and applicant of the "Bitmain" trademark is Beijing Bitmain Technology Co., Ltd. (hereinafter referred to as "Bitmain"), one of the most well-known cryptocurrency mining machine manufacturers in the blockchain industry. It has received venture capital from IDG Capital, Sequoia Capital and other venture capital, and its valuation was as high as 50 billion US dollars at its peak. Bitmain's staff confirmed to 1℃ reporters that Bitmain has no relationship with Shenzhen Bitmain, and does not know Huo Dong.

With the bankruptcy of Lianxin Company, this mining machine, which once had a unit price of more than 5,800 yuan, has also become a hot potato in the hands of many investors.

Liu Jiang found that the mining machines he bought for 5,875 yuan each were being sold on some second-hand trading platforms for 280 yuan each, which means that the 100 "mining machines" he bought for more than 500,000 yuan are now worth only 28,000 yuan. 1℃ reporters found on second-hand trading websites such as Xianyu and Zhuanzhuan that the actual transaction price of the mining machine was between 200 and 350 yuan, less than one twentieth of the original price.

On February 25, 2019, the Zhengdong Branch of the Zhengzhou Municipal Public Security Bureau issued a "Notice of Notification and Filing of Persons Who Are Not Legally Approved to Leave the Country", invalidating the passports and other documents held by Huo Dong and others on the grounds that they were involved in the crime of "fund-raising fraud". This means that many senior executives of Lianxin Company, including Huo Dong, are officially restricted from leaving the country.

On the morning of April 30, when 1℃ reporters once again came to the office address of Antai Company and Lianxin Company on the 23rd floor of the south building of Greenland Center (locally known as the "Twin Towers") opposite Zhengzhou East Station, 1℃ reporters saw that the entire office was empty, even the company logo was cleared away, and the computers and documents in the office were all sealed up by the local public security economic investigation department.

In a chairman's office at the end of the corridor, there are several boxes of Huo Dong's business cards scattered around. A 1℃ reporter called the mobile phone number on the business card, and the prompt tone he heard was "unable to connect."

(At the request of the interviewee, all investors and salesmen involved are pseudonyms)