The Shanghai police, Beijing TV, and Beijing’s banking and insurance watchdog uncovered and criticized crypto-related scams on Tuesday, World Consumer Rights Day.

China marked its annual event where the media and authorities single out cases of marketplace abuse. Burger King, Nike and Muji were shamed in previous years.

This year, crypto scams were in the spotlight.

The Shanghai Public Security Bureau (PSB) announced a cryptocurrency pyramid scheme in the city that accumulated more than 100 million yuan (US$15 million).

Typically, a pyramid scheme is a fraudulent operation to make money based on recruiting an ever-increasing number of investors, which will ultimately collapse since there is a limited number of people in a given community and eventually the organization will no longer be able to profit from recruiting investors. The only people who make money are those few on the top of the pyramid.

The busted organization ran similarly. It lured investors by promising high yields of cryptocurrency to join in, then encouraged the investors to recruit newbies with complex and lucrative reward plans. 

It had 60,000 investors involved and reached 72 layers of “pyramid” until it ceased, the Shanghai PSB said.

A Beijing local television channel reported two cases of crypto scams that happened last year involving the RADR coin and OSK coin. 

An interviewee from Heilongjiang, China’s northeastern border province, alleged the RADR coin had taken his family’s savings of 570,000 yuan (US$89,604). The coin touted itself as China’s most profitable cryptocurrency; however, it was rug-pulled last October. He claimed his family was not the only victim, saying that others had been cheated as well.

Another report from a Beijing television channel came from a reporter who covers the OSK coin’s community and said she saw the coin’s price surge to 298 yuan (US$45) on Feb. 25, then the issuer rug-pulled as the coin’s price dropped 90% instantly. 

In addition to crypto, illegal fundraising in the name of the metaverse and blockchain were also singled out by Beijing’s financial watchdog.

The Beijing Office of Banking and Insurance Regulatory Commission (BIRC) warned college students to not get into scams in the name of metaverse and game-fi with claims of lucrative returns. According to the warning, the scams would lure students to purchase crypto and game props to invest in the project. Some students took out usury loans for the investment. 

Fraud in the name of the metaverse and blockchain games has been criticized since China’s central BIRC’s warning in February.

Liu Yang, partner and attorney of Chinese law firm DeHeng, told Forkast a large number of non-crypto experts were attracted by the Bitcoin price frenzy last year and rushed into the field, and some of these amateurs were targeted by fraud. Such scams can involve a large number of people, significant enough to attract the attention of the media and regulators.

“I believe that China will be even stricter in regulating and cracking down on cryptocurrencies, as well as fraud in the name of blockchain,” Liu said. “It’s also a global trend.”

China’s crackdown on the cryptocurrency-related industry continues after last September’s crypto ban, including uncovering more mining farms,  legislation for illegal fundraising by crypto, and plans to crack down on illegal fundraising in the metaverse and NFTs.

Zhang Xiaoxiao, the founder of ChainAudit who provides consulting services to China’s public security departments on criminal economic activities, told Forkast he expects more legislation on cryptocurrencies to be introduced in the future as part of the measures to tighten regulation.