Chinese authorities have uncovered a large‑scale blockchain‑themed pyramid scheme disguised as a “digital asset innovation project,” exposing how fraudulent operators continue to exploit Web3 narratives to lure unsuspecting investors.
Marketed under the banner of “blockchain ecological construction”, the scheme used fabricated digital‑asset concepts, manipulated token issuance, and aggressive multi‑level recruitment to defraud participants.
The case shows the persistent risks surrounding pseudo‑blockchain projects and underscores China’s intensified crackdown on illegal fundraising and pyramid‑style digital‑asset scams.
Fraud Wrapped in Blockchain Language
The scheme positioned itself as a cutting‑edge blockchain initiative, promising participants access to a “new digital economy model,” “high‑yield token rewards,” and “exclusive early‑stage mining rights.
Operators claimed that the project was part of a national blockchain development effort and used technical jargon to create an illusion of legitimacy.
Beijing Daily reports that organizers promoted the project through online seminars, private chat groups, and offline recruitment events. They framed the scheme as a “once‑in‑a‑generation opportunity” to join a pioneering Web3 ecosystem.
In reality, the project had no functioning blockchain infrastructure, no verifiable token issuance, and no technological development. Its entire model relied on collecting membership fees and distributing rewards based on recruitment volume—a classic pyramid structure.
The operators reportedly used fabricated whitepapers, plagiarized diagrams, and misleading references to government blockchain initiatives to build credibility.
Participants were told that the project was “aligned with national digital‑economy goals,” a claim that investigators later confirmed was entirely false.
Angles of the Pyramid Scheme
The fraudulent project followed a familiar multi‑level marketing pattern, but wrapped it in blockchain terminology to appear innovative.
Participants were required to pay an entry fee to join the “ecosystem.” In return, they received a fixed quantity of a proprietary token that organizers claimed would “appreciate rapidly” as the ecosystem expanded.
Members were then incentivized to recruit others, earning additional tokens and cash bonuses based on the number of new participants they brought in.
The scheme’s reward structure was designed to mimic legitimate token‑distribution models, but investigators found that:
- Tokens had no market value
- No blockchain ledger existed to record transactions
- “Mining rewards” were manually assigned by administrators
- Token prices were arbitrarily adjusted to stimulate recruitment
- Payouts depended entirely on new membership fees
The project’s so‑called “smart contracts” were nothing more than spreadsheets and internal databases controlled by the operators.
Beijing Daily reports that the scheme amassed thousands of participants across multiple provinces before authorities intervened.
