China Coin scam: Claiming to be supported by the state with 6 times return, but fell 90% in the first few days after opening

“China’s No. 1 virtual currency! At least three times return in one year! Director of the Chinese Academy of Management Sciences!”

“Paper money will disappear in 10 years. The spring of digital currency is coming. Are you ready?”

Since February this year, "Zhonghua Coin" has been promoting the "dream of getting rich" online under the banner of "Chinese people's own virtual currency". An investor of "Zhonghua Coin" said that in just a few months, a total of 38 million "Zhonghua Coins" were sold, and the unit price rose from 0.1 US dollars to 3 US dollars during this period. The investor said that many people bought it at around 2 US dollars, and the total sales amount is estimated to be several hundred million yuan.

Recently, the operation mode of "Zhonghua Coin" was investigated and it was found that it was not a real virtual currency, but a "network pyramid scheme" that used virtual currency as a cover to develop downlines and raise funds. On November 14, the Changde police in Hunan said that Zhongxing Tongshou Company, to which "Zhonghua Coin" belonged, had been investigated by the Changde police, and police in many cities were also investigating it.

Promotion: "China's first virtual currency"

Recently, searching for "Zhonghua Coin" as a keyword still yields many related promotional articles. Slogans such as "China's first virtual currency", "Supervised by the Central Academy of Management, strongly supported by the state", "Quick return on investment with triple returns", and "Build a national brand and realize the Chinese dream" are very eye-catching.

"China Coin" was launched in February this year. According to investigations, ZTE Tongshou (Beijing) Biotechnology Co., Ltd. and its branch in Zhengzhou, Henan are responsible for the operation of "China Coin". The project is mainly disseminated on the Internet, and participants come from all over the country.

The introduction materials of "Zhonghua Coin" claim that "Zhonghua Coin" is a digital cryptocurrency designed by the Chinese Academy of Management Sciences and developed by the technical team of ZTE Tongshou (Beijing) Biotechnology Co., Ltd.

"The Chinese currency will be the only digital virtual cryptocurrency that can be circulated worldwide. It can be used for exchange on third-party financial trading platforms and can be used for consumption on Alipay and UnionPay."

I looked up the global digital currency rankings on CoinMarketCap, an authoritative website in the field of virtual currency. The list covers 707 virtual currencies, and there is no mention of "China Currency" or similar English translations.

Pie in the sky: Return on investment six times in three years

Regardless of whether the story of "China Coin" is convincing enough, what attracts most investors is its claimed return rate of at least six times in three years and dynamic rewards of millions of dollars.

Several members of the "Zhonghua Coin" explained the operation mode of the project. The "Zhonghua Coin" began to be issued on February 4 this year, with a total of 60 million pieces.

Promoters said that 30 million coins will be given away for free to the world, and another 30 million coins will be internally subscribed: 5 million coins in the first phase, with a starting price of US$0.1 per coin; 10 million coins in the second phase, with a starting price of US$0.2 per coin; 15 million coins in the third phase, with a starting price of US$0.5 per coin, and the price will gradually increase.

Register as a "Zhonghua Currency" member to purchase Zhonghua Currency, with a minimum purchase amount of 500 USD. Zhonghua Currency is calculated in USD, with a fixed exchange rate of 6.9, and 500 USD is equivalent to 3,450 RMB.

Several investors said that during the actual transaction, RMB was used to transfer money. Members transferred the money to their upstream dealer, who then transferred the money to his upstream dealer, and finally the money was transferred to Shen Qin's account at the Zhengzhou branch of ZTE Tongshou.

After the deposit is received, the member's online account will show the deposit amount. Before the official opening, the Chinese currency can only be bought but not traded.

Part of the $500 for each order will be deducted as promotion fees, and 2% of the remaining money will be released every day to purchase "China Coin", which is commonly known as "return of capital" on the platform.

The price of "Zhonghua Coin" fluctuates every day. Lao Liu, a farmer from Langfang, Hebei, a member of "Zhonghua Coin", spent $500 to buy 1,358 "Zhonghua Coins". When he joined, one coin only sold for $0.15, and later it rose to $3. Xiao Ye, who joined more than a month later, also topped up $500, but only bought 220 coins.

The promotional materials of Zhonghua Coin mentioned that there is a guaranteed six-fold return in three years, and the promoters promised even higher returns when developing downlines. The version Xiaoye heard was "at least fifty-fold return after one year."

In addition to static cashback, "China Coin" also has a generous dynamic reward model, which is divided into expansion awards, elite awards and transaction awards. According to the number of promotions and the number of people, there are three reward levels: star (10 levels), diamond (3 levels) and crown (3 levels).

Among them, those who rank from one star to six stars will get expansion awards, and the income from expansion awards consists of two parts: daily return of added value and a certain percentage of commission.

From Seven Stars to Grand Crown, you can get the Elite Award. In addition to the commission based on your level, you can also get bonuses based on the total performance of the team: the highest level Grand Crown can develop 30 levels, and the performance award is as high as 7.5 million US dollars (about 51.51 million RMB).

The transaction reward is 0.3% of the transaction amount of the next three generations of members. As long as there is a transaction, a reward will be generated.

Lao Liu recommended two friends to join "China Coin" and received dozens of "China Coin" rewards.

Collapse: The price of the coin opened at 35 yuan and fell by 90% in a few days

In May this year, the "Zhonghua Coin" was officially launched at an opening price of 35 yuan per coin. The trading platform is called the "China Market Exchange", abbreviated as China Market Exchange.

Liu and others were full of hope and were planning to make a fortune. But within an hour of opening, the price dropped to 10 yuan, and in the next few days it dropped to 2 yuan. "When I bought it, I spent one or two dollars on one coin, but now I can only sell it for 2 yuan. It has dropped so much that everyone is selling it, and no one is buying it."

In the following period, the price of "Zhonghua Coin" continued to fall, until it dropped to only 50 cents. During this period, the withdrawal function was normal, but many investors expressed their unwillingness to sell and withdraw cash at that time.

Financial columnist Xiao Lei believes that this so-called market price is actually a cash-out operation by bankers behind the scenes. "In the early stages, they create scarcity, monopolize supply, and drive prices higher and higher. Once the sale begins, buyers sell in droves to cash out, and prices naturally drop rapidly."

What made members more alert was that since mid-July, the "Zhonghua Coin" website has been open and closed, and after a while it could no longer be opened. In the WeChat group, several "leaders" with the notes of "Zhonghua Coin Mr. Li" and "Zhonghua Coin Mr. Zhang" have been asking everyone to wait patiently, saying that there will be no problems. But once someone proposed to defend their rights, they would be kicked out of the group directly.

Investors said that the data released by Zhongxing Tongshou Company to the "Zhonghua Coin" members showed that a total of 38 million "Zhonghua Coins" were sold. During the sale period, the unit price rose from 0.1 US dollars to 3 US dollars. Member "Chang Ling" told "Beijing Time" that many people bought it when it was around 2 US dollars, and the total sales amount is estimated to be at least several hundred million yuan.

Investigation: The Central Institute of Management said it had nothing to do with it

It took only half a year for the "China Coin" to be investigated from its rise. According to investigations, the authoritative background mentioned in its publicity was not true.

In the company introduction of ZTE Tongshou, it is mentioned that ZTE Tongshou (Beijing) Biotechnology Co., Ltd. is under the supervision of the Chinese Academy of Management Sciences.

Lao Liu became a member of "Zhonghua Coin" in February this year. "When I saw that it was affiliated with the Central Administration Institute and had a name like Zhonghua, I thought it was a national project and should be very reliable. In addition, Zhongxing Tongshou also has health products (Note: anyone who buys Zhonghua Coin can get a copy of this product), which are high-tech products."

A staff member of the Chinese Academy of Management Science said that the Chinese Academy of Management Science has no relationship with ZTE Tongshou and will not manage virtual currencies. "We study management science and interdisciplinary science, which has nothing to do with virtual currencies."

On June 20 this year, the media reported a press conference on a public welfare event co-sponsored by the China Academy of Management Science and co-organized by Zhongxing Tongshou (Beijing) Biotechnology Co., Ltd. On November 16, a staff member of the China Academy of Management Science said that after verification, an employee participated in an event of Zhongxing Tongshou at the invitation of a friend, but did not speak, and left when he found it was irrelevant.

The staff member said that many organizations in society are now committing fraud under the name of the Central Institute of Management, and the Central Institute of Management also has its own legal department to handle such matters.

Police: The case is under investigation and will be transferred to the court soon

According to several members of Zhonghua Coin, in mid-July, the police in Changde, Hunan Province, closed down Zhongxing Tongshou on suspicion of pyramid selling. On November 14, police from the Non-Investigation Office (Non-State Staff Investigation Office) of the Changde Public Security Bureau in Hunan Province said that the police are currently investigating Zhonghua Coin and Zhongxing Tongshou, and the case will soon be transferred to the court. The police said that police in many cities across the country are currently investigating the matter.

Industrial and commercial registration information shows that ZTE Tongshou (Beijing) Biotechnology Co., Ltd. has a registered capital of 15.55 million yuan, the legal representative is Shen Qin, and the registered address is Room 2023, 2nd Floor, No. 89 Qiantun Road, south of Qinghe Yuxin Community, Haidian District. Its business scope covers technology, culture, engineering, education consulting, investment management and other aspects.

Zhongxing Tongshou's registered address in Beijing is a two-story apartment that is mainly used for living. Each floor has more than 70 rooms, and Room 2023 is one of the rooms on the second floor. The staff of the apartment said that companies can be registered here, and the registration fee is 11,000 yuan per year. The rent is calculated separately, which is about 2,000 to 4,000 yuan per month depending on the area.

The legal person and business scope of the Henan Branch of ZTE Tongshou (Beijing) Biotechnology Co., Ltd. are consistent with those of the Beijing company.

At present, due to police investigation, both companies have ceased operations and the rented office space has been reclaimed.

Member: Some investors do not believe they were deceived and continue to invest in new projects

The draft of the General Principles of Civil Law submitted for review this year clearly mentioned that online virtual property should be protected. Financial columnist Xiao Lei said that the draft mentioned virtual property, targeting regular virtual commodities with transparent and open rules and independent technology, rather than fake virtual currencies that are unilaterally opened and controlled by dealers and recruited by people to develop offline.

"Many copycat virtual currencies are disguised as innovation, developing downlines to accumulate money, and promising users high returns, but in fact they are pyramid schemes," said Wu Changhai, director of the Internet Economy Research Center of the Capital Finance Research Institute of China University of Political Science and Law.

In July this year, after Zhongxing Tongshou was investigated, employees called on members to petition for rights protection. Nowadays, in a WeChat group with 495 members, members occasionally ask for the latest progress, and the answer they get is to wait patiently. Member Xiao Ye revealed that there are no less than 15 such groups.

Lao Liu, who makes a living as a farmer, has invested in many virtual currency projects over the past few years, with a total investment of more than 200,000 yuan. During this period, he encountered closures or runs away many times, but he never thought he was cheated. Some investors have the same mentality as Lao Liu.

While waiting for the processing of the Chinese currency, Lao Liu discovered a new project called "Yunshumao". During the chat, he kept emphasizing the development prospects of "Yunshumao" that he saw on the Internet. After investigation, it was found that as early as 2013, a project called "Yunshumao" was investigated for illegal pyramid selling.

Xiao Lei believes that many investors witnessed the crazy rise of Bitcoin at the beginning, and some people have made money in virtual currency, so they will continue to invest blindly. After the investment fails, they often blame their own misjudgment. Wu Changhai said that the lack of education on relevant legal and financial knowledge of investors and their eagerness for quick success are also one of the reasons for the frequent appearance of fake virtual currency pyramid schemes.

Experts: "Zhonghua Currency" is actually an online pyramid scheme and is currently difficult to regulate

In 2009, the virtual currency Bitcoin was born, and its subsequent price surge shocked the world. Financial columnist Xiao Lei said that as a representative of virtual currency, Bitcoin, on the one hand, uses cutting-edge technology and strictly controls the supply; on the other hand, after several years of development, well-known institutions have participated in it, and its market acceptance is getting higher and higher.

As early as 2013, the People's Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission, the China Insurance Regulatory Commission and other ministries and commissions issued the "Notice on Preventing Bitcoin Risks", which means that the country has begun to examine the financial risks brought by blockchain digital currencies.

In recent years, a large number of cases of illegal pyramid schemes under the guise of virtual currency have begun to emerge in China. Currently, more than ten types of copycat "virtual currencies" have been exposed, including Baichuan Coin, Mark Coin, Beta Coin, Dark Coin, and Huaqiang Coin.

Wu Changhai said that in cases of virtual currency pyramid schemes, the currency is not issued in constant quantities, is simply speculated on, and has no commercial applications; most of the servers are located overseas, making it difficult to investigate and punish; and when the peak period for returning money comes, they simply shut down the network and run away.

"There have always been big loopholes in the supervision of online pyramid schemes," Wu Changhai said. The "Regulations on Prohibition of Pyramid Schemes" implemented in November 2005 stipulate that the Industrial and Commercial Bureau shall supervise pyramid schemes, but now pyramid schemes have moved to the Internet, and many of them have obvious financial nature, which has brought great difficulties to supervision. However, the law does not stipulate that the People's Bank of China and the China Banking Regulatory Commission have the obligation to supervise online pyramid schemes.

Li Xu, known as the "first person to fight against MLM in the private sector," believes that MLM is difficult to regulate because it is cross-regional, spreads quickly, and is more secretive, which makes it more difficult to collect evidence. On the other hand, participating in MLM is illegal, and the money and property involved will be confiscated after being investigated. Therefore, some participants are unwilling to report after discovering that they have been deceived, but instead seek to resolve the matter privately with their superiors. (Beijing time)