A group of Chinese traders has accused two Bitcoin over-the-counter (OTC) market makers of illegally collecting Bitcoin worth $56 million under a loan scheme.
As reported by the state-owned news agency BJ News on May 22, both the OTC desk operators – Yi Zhou and Xiang Li – lured around 100 traders, promising high returns against their loaned assets.
A group of 20 victims also filed a police complaint against the perpetrators in Hangzhou in mid-April.
In September 2017, the Chinese government banned initial coin offerings (ICOs), along with all crypto trading activities within its jurisdictions. However, the country, which once handled the largest amount of crypto trades, now only allow digital assets trading through OTC desks.
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As per the police complaint, Zhou and Li operated chat groups on WeChat and invited OTC traders to post bids and asking prices for crypto trades. They engaged with the traders for around two years, gaining their trust, before pitching the idea of a Bitcoin loan scheme.
However, both of them defaulted from paying out interest since April, making vague excuses. This alarmed the investors as both operators continued to accept deposits though they knew they wouldn’t be able to pay interests.
Both Zhou and Li are now held under police custody under the charges of fraud.
China and crypto
Though only limited to OTC desks, the crypto traders are still operating in a grey area. The Chinese law allows the transfer of property from one person to another, but according to experts, if someone is facilitating a crypto-based service, making profits from spreads, it might be considered as fraud.
Meanwhile, WeChat, the Chinese one-stop-shop for messaging and all other digital activities, has updated its policy last month to prohibit merchants from dealing in digital assets.