The Ponzi scheme was put under investigation, all the staff of the exchange were arrested, and the cryptocurrency circle is facing another wave of arrests.
Under the heavy blow of supervision, a large number of Ponzi schemes fled in a hurry, and the Ponzi scheme finally collapsed.
Many exchanges announced that they would no longer provide services to Chinese users. Faced with the wave of arrests, employees of exchanges hurriedly resigned and fled.
According to insiders, many industry media have participated in the issuance of coins or provided support for Ponzi schemes. "The risks are very high, and many have already fled to Southeast Asia."
Panic spread quickly. Withdrawing coins became the common choice of many cryptocurrency players.
Some practitioners lamented that the intensity of this round of regulation in the cryptocurrency circle is far greater than that of "9.4". After this, the blockchain industry will also be purified.
01 The wave of capital running away
In 2019, the hottest thing in the cryptocurrency circle was the Ponzi scheme. Now, regulators have taken strong action to crack down on these scams under the banner of blockchain.
ICC, the Internet celebrity chain that claims to be the "king of the era of smart economic Internet celebrities", was recently investigated by Xi'an police. And Qubu, which claims to "make money by walking", was also investigated by Changsha authorities on charges of "illegal pyramid selling".
PlusToken, which was involved in the case with a value of tens of billions, was seized by the police in June this year. Six traders fled to the Pacific island nation of Vanuatu, but were still arrested by local police and repatriated.
Recently, we have received nearly 100 reports of Ponzi schemes, involving popular Ponzi schemes such as the Huo Niu Project, Gyro World, and Palm Mingzhu. Most of them have already run away.
In fact, running away is the only way out for many Ponzi schemes.
On November 19, some investors reported that the cryptocurrency fund project EVC was unable to withdraw cash and was suspected of running away.
Investors said that all their withdrawals on the EVC platform were rejected
"In the secondary market, the price of EVC dropped directly from 3 yuan to 0.3 yuan."
It took EVC less than two months from issuance to running away.
What kind of project is EVC? According to the information, it was launched by the "K-ONE Alliance Community" and issued on September 25.
The EVC white paper states that this is a decentralized "advertising resource aggregation ecosystem" that aims to improve the conversion rate, coverage and profitability of advertising resources.
“But the way it’s played is exactly the same as a Ponzi scheme.”
Specifically, investors can top up USDT to purchase EVC's "advertising package". After the 10-day investment cycle, investors can obtain a static return of 8%-15%.
In addition, you can obtain dynamic benefits by recruiting people.
EVC promotional materials show that its monthly return is as high as 26.99%
When investors found that they could not withdraw EVC coins, they asked the project party the reason in the community, but found that the community had been disbanded by the project party's operators.
In anger, they began to form a rights protection group. But ironically, not only did they lose money, they also encountered ruthless ridicule from the project owner.
Chen Xiang revealed that "K-ONE Alliance COO Quan Zhilong" is one of the leaders of the EVC project, and he has also joined an EVC rights protection group. But he did not come to appease, but to ridicule.
"I'm already abroad. If I don't cut you off, who should I cut off, you XX sons?" he said.
Chen Xiang revealed that Quan Zhilong's real name is Xie Zixuan, and he and Zhang Wei are both initiators of the K-ONE Consensus Alliance. The K-ONE Consensus Alliance community claims to be jointly initiated by domestic early blockchain players, institutions, vertical media, and community leaders, and has more than 100 WeChat groups.
Before EVC, K-ONE Consensus Alliance also launched two digital currencies, RX and NSC. However, the latter two currencies have returned to zero.
The main exchange where EVC is listed is BiKi. And the previous coin of K-ONE, NSC, was also listed on BiKi exchange. "The two are a combined harvester."
There is indeed a "good relationship" between the K-ONE Consensus Alliance and the BiKi Exchange.
On October 31, 2019, the first interview program of BiKi's "BiKi Research Institute" was launched. The guest of this episode was Xie Zixuan.
At that time, the host asked: "As far as I know, BiKi has also reached a strategic cooperation with the K-ONE Consensus Alliance Community. Can you explain in what areas the two parties will cooperate?"
Xie Zixuan said that the two parties have common views on traffic and will work together to incubate new projects in the next step.
Now that Xie Zixuan has run away, BiKi’s situation is not good either.
02 Exchange Exit
The popularity of Ponzi schemes is inseparable from the support of exchanges. The recent news that BISS exchange was severely cracked down by the police has caused panic among exchanges.
On November 22, 2019, multiple media outlets reported that Beijing police had cracked the BISS illegal digital currency exchange fraud case and arrested dozens of suspects. The rumor that BISS was “taken down” by the police at the end of October was thus confirmed.
As for the specific details of BISS's suspected fraud, the police have not disclosed them. However, outsiders speculate that the "coin-stock transaction" provided by BISS may be the focus of the case.
The so-called coin-stock transaction is that investors use digital currency to invest and buy U.S. stocks on the exchange. This product has two major risks: one is that it violates foreign exchange control policies, and the other is that the platform may falsify and use fake stocks to deceive investors.
“After the BISS incident, exchanges that do coin-to-stock trading, such as HOX and BFX, directly shut down related services,” said Zhang Yuan, a blockchain practitioner.
On November 23, 2019, CEO Exchange announced the delisting of three currencies, namely B91, CXC and BRC. "These three currencies are notorious pyramid schemes and Ponzi schemes in the currency circle," said Zhang Yu.
"Even when supervision comes, exchanges that are still blatantly cutting leeks are committing crimes in defiance of the law," said Zhang Yuan.
Under the iron fist of supervision, running away has also become an option for some exchanges.
On November 21, 2019, IDAX Exchange issued an announcement that it would remove the platform currency IT trading. IT that users have not sold will be forcibly converted into "IDAX equity" by the platform at a price of 0.4USDT.
Many investors interpreted this announcement as "IDAX ran away."
In fact, IT is a Ponzi scheme operated by IDAX Exchange. After users invest in IT, the profit of locked positions for two years can be as high as 1250%.
Another Ponzi scheme exchange "Newton" that was previously exposed (see: "Newton became the world's second largest exchange in 43 days, but is there a Ponzi scheme trap behind it?") has also issued an announcement of "soft escape."
Newton Exchange Announcement
The announcement stated that "in order to ensure that loyal Newton players have enough NT", the Newton Exchange decided to forcibly convert users' assets into the platform currency NT. In addition, "in order to protect the interests of the majority of users and the value of NT", the platform decided to distribute these NT at a rate of 10% per month in October.
“We stole your money and said it was for your own good.” One investor commented, “Newton is saying, we don’t admit the collapse, nor do we admit running away, but your USDT was indeed taken away by us.”
Ponzi scheme exchanges have all run away, while second- and third-tier domestic exchanges have distanced themselves from domestic investors.
Announcing that they would “no longer provide services to Chinese users” was their common choice.
For example, on November 23, 2019, QBTC Exchange, one of the three exchanges listed on EVC, issued an announcement, announcing that it would transfer its business to Ukraine and stop providing services to users in mainland China.
Many exchanges, including Matcha and Btuex, have also issued announcements, announcing that they will stop providing services to users in mainland China.
But in fact, most exchanges still adopt the method of "setting up servers overseas and providing legal currency matching platforms" to provide services to domestic users.
Sometimes, expressing one's stance can even turn into a farce.
On November 25, 2019, a Weibo account with the ID "ZB中币" claimed that the ZB exchange no longer provides services to domestic users. ZB officials later refuted the rumor, saying that the platform is operating normally and located the Weibo account in Shenzhen.
However, netizens soon accused ZB, saying that denying the rumors meant that the platform still provided trading services to mainland China, which was directly contrary to national policy.
Caught in an awkward situation, ZB finally deleted the rumor-refuting Weibo post and reposted a vague announcement on Weibo, avoiding the controversy over whether it serves mainland Chinese users.
03 The crowd dispersed
"This wave of regulation has a far greater impact on exchanges than the '9.4' incident two years ago," said Zhang Yuan.
On September 4, 2017, the central bank and seven other ministries and commissions issued the “Notice on Preventing Risks in Token Issuance and Financing,” which caused a stir in the cryptocurrency community. Since then, domestic exchanges such as Huobi and OKCoin have shut down their services.
At present, as the regulation of exchanges becomes tighter, many investors are beginning to panic. Withdrawing coins has become a common choice for many people.
"Hurry up and withdraw your money. Don't keep your money in the exchange anymore." In a WeChat group, digital currency investor Xiao Li urged others to withdraw their money and leave the market as soon as possible. "It is safest to keep your money in your own wallet."
In the fiat currency trading area of the exchange, many merchants also felt the uneasy atmosphere. "The Alipay payment accounts we received were basically blocked within a few days."
"Alipay's monitoring of digital currencies is getting stricter, and fewer and fewer merchants on Huobi, OK and other platforms support Alipay transactions," said Xiao Li. "In a few days, bank card transactions may also be banned."
His basis is a document issued by the Shanghai headquarters of the central bank on November 22. The document stated that the central bank will "continue to strengthen the cleanup and rectification from the payment and settlement end" in response to the behavior of setting up servers overseas to provide virtual currency trading services to domestic residents.
The so-called "payment and settlement end" rectification was interpreted by the outside world as the central bank's further monitoring of virtual currency trading activities and cracking down on "legal currency transactions" in major exchanges.
Investors were in a panic, and exchange employees who were caught in the storm were not immune.
Exchanges used to be the most profitable industry in the cryptocurrency world, and most of them earned a lot of money. However, now, they are scrambling to escape.
For example, some media reported that the BiKi exchange, which was recently criticized by official media, has seen a large number of employees resign - they do not want to "go to jail for work" like BISS employees.
This scene is very similar to the P2P industry. In the era when P2P was raking in money, many P2P companies were hiring people on a large scale. In order to evade supervision, they did not use bank cards to pay wages, but let the finance department take bundles of cash and hand them directly to employees.
In the end, the employees received a notice from the police, demanding the return of all their income while working at the P2P company. Some middle and senior executives of the company were collectively imprisoned, and some ordinary employees invested their savings for many years in their own platform and eventually became victims.
"All the work over the past few years has been in vain." lamented a P2P practitioner.
"I would like to give some advice to friends who are still working on the front line of the blockchain industry. If you can change jobs, change jobs. If you can quit, quit." A blockchain practitioner wrote in WeChat Moments, "Even if you have nothing to do at home, you should say goodbye to these high-risk companies first."
In 2019, the well-known KOL in the cryptocurrency circle, "Chen Nuxia" (Nuxia Blockchain), was taken into custody by the police.
There are reports that her arrest may be related to the BISS incident. Earlier in 2019, "Ms. Chen" served as BISS CMO, responsible for BISS exchange market business.
An insider said that some media outlets that participated in the issuance of coins or provided support for Ponzi schemes have fled, "most of them went to Southeast Asia."
“Media and communities that are too close to the project owners and help with publicity, promotion, and traffic generation are also within the scope of regulatory crackdowns,” said Zhang Yuan. “The wave of arrests in the cryptocurrency circle has just begun.”
When regulation came, exchanges, Ponzi schemes, and pyramid scheme coins all ran away.
This once extremely crazy market has reached its freezing point.
And this is something that has long been destined to happen.