Chinese police confiscated cryptocurrencies equivalent to $ 15 million and sports cars worth $ 2 million from scammers who issued fake tokens on the Huobi exchange.
The Chinese Ministry of Public Security reported that Wenzhou City Police arrested ten people suspected of fraud. According to representatives of the ministry, this is the first criminal case in China in which fraudsters used smart contracts on the blockchain to create fake tokens and deceive the victims.
Police confiscated BTC, ETH, and USDT, the equivalent of $ 15 million, and seized $ 2 million worth of Ferrari and McLaren cars and luxury villas owned by the suspects.
For the first time, fraud was reported in April by one of the victims named Lee. He said that he joined a group on Telegram called Huobi Global Arbitrage HT Chinese Community. The creators of the group advertised smart contracts on the blockchain that Huobi Tokens (HT) can generate – their own tokens of the Huobi cryptocurrency exchange.
“Simply put, you send one ETH to the specified address and get 60 HT. Then you can sell them to make a difference, ”Lee said.
However, after Lee sent 10 ETH to the address provided by the administrator of the Telegram group, he realized that the 600 HT he received were fake and could not be sold. After that, he went to the police.
The ministry said the suspects created dozens of such groups with over 10,000 fake accounts so potential victims believe that fraud was a legitimate arbitrage opportunity.
After receiving “tens of thousands of ETH,” scheme creators Chen, Yu, and Xu, who ran seven employees, spent fraudulently on money for luxury goods, including suburban villas and sports cars.
Police admitted that this is a new type of fraud in China, but did not specify how exactly the suspects were discovered and whether blockchain analysis was used to track transactions.
Recall that at the beginning of last month, the Chinese police began to freeze the accounts of Chinese OTC traders because of suspicions that they use crypto assets for money laundering and other illegal actions.