- Shenzhen Shikongyun Technology, one of China’s largest Filecoin mining entities, is charged with orchestrating an $83 million pyramid plot.
- Prosecutors claim the firm misled investors about potential profits and amassed over 100,000 members in just over a year.
Inside the Chinese Crackdown on Filecoin Miners
In a significant clampdown on cryptocurrency operations, a top Filecoin (FIL) mining firm, Shenzhen Shikongyun Technology, is embroiled in a legal quagmire, charged by Chinese officials for allegedly constructing an elaborate pyramid scheme worth a staggering $83 million.
Deciphering the Pyramid Allegations
Emerging from a social media revelation, Pingnan county’s local court in the Guangxi autonomous region has initiated criminal proceedings against both Shenzhen Shikongyun Technology and its four key executives. The heart of the allegation is that the firm distorted the prospective profitability of its technology. Such embellishments, prosecutors argue, were designed to allure investors into mining Filecoin through the company’s platforms.
For clarity, the practice of “mining” in the blockchain context involves using computational power to solve complex mathematical puzzles, thereby validating transactions on the network and earning rewards, typically in the form of the cryptocurrency being mined. Filecoin’s distinct model offers decentralized storage solutions, allowing users to rent out their storage space and earn FIL tokens in return.
Shenzhen Shikongyun’s modus operandi reportedly mandated newcomers to shell out funds, either to purchase mining equipment directly or to cover their rental costs. In a bid to enhance its outreach and allure, the company established a website and leveraged popular Chinese platforms like WeChat, promoting their operations through channels like filpool.io and bpool.io.
What’s striking is the sheer scale and speed of the operation. Between February 2021 and May 2022, the company attracted nearly 100,000 participants, allegedly siphoning off an astronomical 606.95 million yuan ($83.3 million) in the process.
This unfolding drama gains further prominence against the backdrop of China’s stringent stance on cryptocurrencies. In September 2021, the nation imposed a blanket ban on all cryptocurrency dealings within its mainland borders. Contrarily, its neighbor, Hong Kong, has exhibited a more favorable disposition towards the crypto ecosystem.
Meanwhile, Filecoin, the cryptocurrency at the center of this controversy, witnessed its market price dip to $3.80, marking a 5.4% slide over the preceding day, underscoring the potential impact of such high-profile regulatory actions on crypto valuations.