What happened to the Chinese authorities’ 190k Bitcoins?

Chinese journalist Colin Wu has published an investigation into PlusToken, one of the largest cryptocurrency Ponzi schemes in history.

According to the journalist, Chinese authorities have seized a large number of digital assets. The PlusToken team, led by a middle school graduate from Changsha, collected 310,000 Bitcoin (BTC), 9.17 million Ethereum (ETH), and more than 51 million EOS using a simple Ponzi scheme and pyramid scheme model. Chinese police confiscated 190,000 BTC, 830,000 ETH, and 27.24 million EOS.

“A man from Changsha, Hunan Province, who only graduated from middle school, collected 310,000 bitcoins; 9.17 million ether; more than 51 million EOS, etc. His model was a simple Ponzi scheme + pyramid scheme, raising funds and promising interest through the development of both upstream and downstream lines.”

Colin Wu, journalist

According to Wu, some of the confiscated cryptocurrencies were sold through Beijing Zhifan Technology, similar to the American company Chainalysis, but it remains unclear what happened to the remaining assets.

Wu and another source, Jiang Zhuoer, claim that most of the confiscated BTC was sold between late 2019 and mid-2020, when BTC prices fluctuated between $7,000 and $12,000.

However, the fate of the rest of the assets is still unknown. Overseas analysts who follow PlusToken addresses believe that although most Bitcoin has been sold through the Huobi platform, about 15,000 BTC may still need to be sold. They also assume that Ethereum addresses remain the same.

The journalist noted that there may be a discrepancy between the addresses identified by the police and those recorded by foreign observers. He also noted that the police were still following some addresses.

What is known about PlusToken

In 2019, PlusToken cryptocurrency wallet users lost $3 billion after project leaders fled with their money. The platform was launched in 2018 and was promoted as a decentralized international project developed by a team from South Korea. PlusToken was targeting Asian and European countries.

PlusToken investors were offered guaranteed monthly payments from 6% to 19% and bonuses for attracting new participants. The company planned to register 10 million users by the end of 2019, but the stated number of participants was 3 million people.

Investigation

In March 2019, police in the southern province of Hunan launched an investigation into the PlusToken Ponzi scheme. Since then, the head of the China division, Chen Bo, and five other Chinese nationals associated with the scheme have been on the run.

A few months after the platform was suspended, Primitive Ventures Managing Partner Dovey Wan reported that Chinese police were able to apprehend critical suspects in the PlusToken case.

LAST MINUTE

Like sir @loomdart At ‘s request, this thread is about the ongoing sell-off by PLUS Token, the largest Chinese PONZI that has defrauded approximately 70,000 people. $BTC +~800K $ETH

I touched on it briefly in my last Coindesk column, but it deserves additional attention as it could lead to further selling. pic.twitter.com/uIjgrzwHET

— Dovey “Rug the fiat” Wan (recruitment) (@DoveyWan) August 14, 2019

At the same time, auditing firm Peckshield reported that at the beginning of July, funds with a total value of about 1,000 BTC in wallets began to flow into Bittrex and Huobi exchanges.

4. A security auditing firm called Peckshield did a graphical analysis of the flow of money from PlusToken’s wallet in early July and found that around ~1000 of the total went to Bitrrex and Huobi. So basically the sell-off started in early July pic.twitter.com/uDXw1vt38t

— Dovey “Rug the fiat” Wan (recruitment) (@DoveyWan) August 14, 2019

Rumors also spread among Chinese investors that someone allegedly linked to PlusToken was repeatedly leaking 100 BTC to the Binance exchange.

I couldn’t find the chat, but a few days ago, Chinese investors said that someone was depositing 100BTC continuously to Binance. I will write the chat details here when I find them.

I suspect it’s related to PlusToken pic.twitter.com/0Uiamc8qn4

— Dovey “Rug the fiat” Wan (recruitment) (@DoveyWan) August 14, 2019

Chinese police detained 27 main suspects and 82 key participants in the PlusToken cryptocurrency pyramid scheme in July 2020.

Dovey Wan confirmed the information about the arrest of PlusToken organizers. He explained that they have been wanted for 12 months. Such a long search can be explained by the fact that key participants of the pyramid are scattered across different countries, complicating the search efforts.

First sales of seized assets

In November 2020, it was learned that Chinese authorities seized $4.2 billion worth of cryptocurrencies from the PlusToken financial pyramid. The government will sell it and send the profits to the state treasury.

At the time, the government reportedly seized the following cryptocurrencies: 195,000 BTC, 833,000 ETH, 1.4 million LTC, 27.6 million EOS, 74,000 DASH, 487 million XRP, 6 billion DOGE, 80,000 BCH, and 214,000 USDT.

The cryptocurrency landscape in China

China has long been the flagship and driving force of the cryptocurrency industry. In terms of mining, it has competed on par with the rest of the world, supplying a significant portion of the total hashrate of leading coin networks. Mass production of mining equipment has also been established there. But everything changed in 2021 when the People’s Bank of China outlawed all cryptocurrency-related activities.

Websites of cryptocurrency exchanges and many internet resources dedicated to cryptocurrencies were banned. Moreover, in order to avoid uncertainty, the regulator openly admitted that stablecoins from Tether, Bitcoin and Ethereum are not fiat currencies. A few years ago, in 2017, Chinese authorities successfully banned ICOs and declared that companies conducting ICOs could violate financial regulations.

But according to current data provided by CCAF experts, mainland China’s share of the world hashrate is 21.11%. That is, only 10% less than the June 2021 figures. And this is despite the complete ban on cryptocurrency mining.

Source: CCAF

The largest companies producing mining equipment are also located in China. First of all, these are devices of the Bitmain and Antminer series, as well as MicroBT from WhatsMiner and miners from Innosilicon, AGM, Canaan and Ebang.

Therefore, despite all the current bans, China continues to be one of the most critical players in cryptocurrencies, acting like an invisible shadow.