In December, the Chizhou police detained eight persons from several regions and froze their assets worth millions.
Beijing’s onslaught on cryptocurrency continued in the new year, with Chinese authorities freezing over 6 million yuan ($1 million) worth of cryptocurrency and arresting eight individuals.
According to a source in Nikkei Asia, the Chizhou public security office discovered a crypto rug pull scam worth up to 50 million yuan ($7.8 million). The authorities launched a probe last June after an investor lost 590,000 yuan in cryptocurrency. The investigation tracked out eight individuals residing in various regions. Additionally, the police confiscated luxury automobiles, villas, and other high-value things from the defendants that were allegedly acquired with the fraudulent funds.
The bogus DeFi scheme enticed investors by promising huge profits on liquidity swaps. However, when investors invested their money, the fraudsters laundered it via anonymous pools and made off with the whole sum. Chizhou’s public security department stated:
“After the police task force investigated and analysed the case, it was determined that this was a typical instance of unlawfully gaining virtual cash via the use of blockchain technology.”
Rug pulls have grown in popularity as a kind of fraud in the decentralised finance (DeFi) arena, owing to their relative ease of execution. According to Chainalysis statistics, investors will lose more than $2.8 billion in 2021 due to rug pulls. These sorts of schemes often entice participants with promises of huge profits, and once the pool has amassed sufficient wealth, the scammers disappear with the money. According to the Chainalysis research, “rug pulls have emerged as the DeFi ecosystem’s go-to scam, accounting for 37% of total cryptocurrency scam earnings in 2021, up from 1% in 2020.”
While the usage of cryptocurrency for illegal purposes is expected to be less than 1% of the overall supply, the rising number of frauds in the DeFi area has eroded investor trust. However, it is critical to highlight that these schemes often rely on the end-weaknesses user’s rather than on a flaw in the encryption technology itself. This is obvious from the top15 largest rug pull statistics, which indicates that the majority of large frauds used new coins promising substantial profits.