Shikongyun Execs Face Charges in $83M Pyramid Scheme; China's Latest Crackdown on Filecoin Miners.

Executives from Shenzhen Shikongyun Technology, a prominent Filecoin mining company in Guangxi's Pingnan county, face charges over a pyramid scheme that amassed over 600 million yuan (US$83 million). The firm allegedly misled investors about Filecoin's potential, reflecting China's increased scrutiny of cryptocurrency operations and schemes.

According to local prosecutors, Shikongyun exaggerated the economic model and investment potential of its Filecoin project, misleading investors. The company reportedly attracted nearly 100,000 members from February 2021 to May 2022, accumulating 606.9 million yuan and around 32 million Tether (USDT) tokens, which are stablecoins pegged to the US dollar. Prosecutors claim that Shikongyun coerced members into purchasing or leasing its mining equipment and offered returns based on the recruitment of new participants to the scheme.

The alleged fraud, characterized by enticing promises of high returns, is deemed a serious criminal offense that disrupts social and economic order. These charges underscore China's ongoing regulatory hostility towards cryptocurrencies following the ban on financial transactions involving digital tokens in 2018.

This prosecution aligns with the Chinese government's crackdown on cryptocurrency mining, which was announced by the State Council in May 2021. Filecoin, a cryptocurrency operating on a decentralized storage network, rewards storage providers with tokens. It was launched in 2017 by Protocol Labs, the creator of the Interplanetary File System (IPFS), a Web3 technology with a significant following in China.

Shikongyun's case is not an isolated incident, as authorities have targeted other Filecoin mining firms due to increased scrutiny of cryptocurrency-related activities. In December 2021, executives from RRMine, a Filecoin mining and storage services provider, were reportedly apprehended for investigation by Chengdu police in Sichuan province.

Last year, RRMine announced the relocation of its headquarters to Singapore to comply with tightened restrictions on cryptocurrency usage in mainland China.

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