Another cryptocurrency project has been busted by law enforcement in China for allegedly soliciting money from investors with fraudulent claims.
According to Guangdong Daily, a provincial government organ in China, police in Shenzhen arrested six individuals Monday who allegedly defrauded 3,000 Chinese investors out of $47 million by selling a cryptocurrency they claimed was backed by a commodity.
The six suspects formed a firm based in Shenzhen called PEB, which beginning in January 2017 issued a blockchain-powered token dubbed Pu'er Coin, according to the report.
The project's website says buyers of the token are entitled to hold a contract representing ownership of a certain amount of the Pu'er Tibetan tea the firm has in stock, which it claims to be worth billions of dollars.
While the token can be subsequently exchanged in a secondary market called Jubi.com, another website claims the contract can also bring a 12 percent annual return if investors choose to lock their funds for 12 months.
According to the police investigation, though the firm had only a "very limited amount of the tea in stock," it promised high short-term returns to investors in social media promotions and roadshows at high-end hotels.
The police said the project succeeded in attracting a significant number of investors by manipulating the secondary market with its own funds to drive up the token price twentyfold over the course of 2017.
In fact, this week's crackdown may not be entirely surprising as the firm had received a warning and a fine late last month from China's State Administration for Market Regulation, whose mandate is to ensure fair and just market competition.
The authority fined the firm $20 million for disseminating false claims in an advertisement that touted its supposedly large stockpiles of the Tibetan tea to back the token.
The arrest marks another notable crackdown on alleged cryptocurrency fraud in China as law enforcement in the country have beefed up efforts to battle illegal fundraising.
As previously reported by CoinDesk, police from Xi'An have arrested the founders of an alleged nationwide cryptocurrency pyramid scheme that is said to have amassed $13 million from over 13,000 people.
Chinese tea image via Shutterstock