A man identified as Tang was recently arrested by police in Bao’an District for organizing a pyramid scam that traded in virtual currency, the Southern Metropolis Daily reported yesterday.
The case emerged on the night of March 27 in front of Zhennan Police Station in Bao’an District where Tang was forced to pay back debts to more than a dozen investors who had been swindled.
During questioning, police found that Tang was suspected of organizing a multi-level marketing scam over the past two years. An investigation team was then set up to uncover the truth.
During the interrogation, Tang said he had come to know a person surnamed Wang on WeChat and added him as a friend. Wang had said he was working for a global investment company called LPA and was in charge of the Greater China region.
Tang believed Wang as the man had given him a detailed introduction to the operation mode of the investment platform, and Tang later transferred 2,000 yuan (US$314.85) to Wang for investment.
Three months later, Wang gave Tang 2,000 yuan and said the original investment capital was still in the account, which made Tang believe in him even more.
Wang took Tang to an LPA seminar in Jakarta in February 2017, where over 200 people were in attendance. After the seminar, Wang invited Tang to introduce the LPA investment platform to others and in return, Tang would receive a commission of 5 to 6 percent of the investment amount.
Over the next six months, Tang persuaded many people to join his investment group and created WeChat groups to instruct the members. By the time he was busted, Tang had already added more than 100 members to invest on the LPA platform to trade in virtual currency.
The investment team organized by Tang invested more than 5 million yuan, earning Tang a profit of over 500,000 yuan with around 300,000 yuan in commission.
The suspect later told the police that the online platform would issue 2 million LPA coins, a type of virtual currency, with each coin valued at US$0.02. The rule was that the value of the LPA coin would rise by US$0.01 if investors traded 100,000 coins. When the value of the coin rose to US$0.04, investors could withdraw cash for the coins they possessed.
Normally, when investors registered as members, the platform would match up investors automatically and the transaction would be made among members. The platform would take a 10-percent transaction fee.
However, the increase of LPA coins started to slow down last June and all investors were required to transfer money to their upper leaders on the platform. In October, the value of LPA coins stopped increasing and investors could no longer withdraw cash from their accounts.
It was also then that Tang found Wang had gone missing, so he dismissed the WeChat groups and hid from his members.
Some of Tang’s members managed to find him March 27 and forced to him to return their investment. Tang failed to return the money to the members and was taken to the police station.
The police have now detained Tang under the charge of organizing a pyramid scheme for trading with virtual currency. The police are tracking down the other suspects at the moment.