The authority had earlier fined the firms $20 million for disseminating false claims in advertisements
It is not just India where cryptocurrency frauds are being uncovered frequently. China, which is one of the biggest markets for virtual currencies, also uncovers such frauds every now and then.
Police in Shenzhen arrested six individuals on Monday who allegedly defrauded 3,000 Chinese investors to the tune of $47 million by selling a cryptocurrency they claimed was backed by a kind of tea, reported Guangdong Daily.
The report said that these six individuals formed a firm named PEB in January last year and issued a blockchain-powered token dubbed Pu'er Coin.
On its website, the firm says that everyone who bought the token holds ownership of a portion of the Pu'er Tibetan tea - the firm apparently has - in store. It adds that the value of tea is worth billions of dollars.
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However, the police investigations revealed that the firm had only a "very limited amount of the tea in stock”.
Allegedly, the firm promised high short-term returns to investors in social media promotions and roadshows at high-end hotels. The tokens were also eligible to be traded in a secondary market.
Incidentally, the firm owners used their own funds to fraudulently drive up the price of their token in the secondary market. The police said the project succeeded in attracting a significant number of investors.
The arrests, however, was not unexpected. The firm had already been slapped with notices from China's State Administration for Market Regulation. The authority had fined it $20 million for disseminating false claims in advertisements.
Earlier, the police arrested founders of nationwide cryptocurrency pyramid scheme who allegedly defrauded over 13,000 people. The scale of the fraud was around $13 million.