Chinese Government Detects 421 Fake Cryptocurrencies

Chinese government recently published a study, as a result of which 421 fake cryptocurrencies have been detected. The study was initiated by China’s Ministry of Industry and IT, and conducted by the experts of national committee of internet financial security, IFCERT.

According to the officially published results of the study, over 60% of the 421 detected fake cryptocurrencies are run from overseas servers. This makes it difficult to find and to track the responsible entities hence this fraud in the crypto space can be highly dangerous.

As reported, IFCERT has been conducting an ongoing monitoring of the situation, as a result of which 3 key features of fraudulent digital currency profiles were highlighted.

  1. The detected fake cryptocurrencies are relied on a so-called ‘pyramid scheme’ operational model. In this model investors are first compelled to make a payment, and then promised returns in case they involve other investors in the scheme as well.

  2. Next feature of a fraud cryptocurrencies, according to IFCERT, is the absence of open-source code in these fake digital assets. This allows the creators of the fraud to fool investors into an illusion of skyrocketing growth. They are showing such fake results by artificially splitting the tokens to create an impression of proliferating rewards. The general claim here is that the more tokens are generated, the more their value increases.

  3. Lastly, considering the fact that the fake coins cannot be traded on legitimate crypto exchanges, they are largely traded through over-the-counter deals as well as on transient phony platforms. Obviously here the system has no transparency and the scammers can manipulate apparent price surges. Meanwhile it is impossible for the investors to withdraw any funds in order to benefit from such changes.

The report concludes that such frauds are cases of “illegal fundraising,” which involve high risks of causing measurable losses for investors in addition to leaving them with no opportunity to defend their rights.

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