Chinese company accused of orchestrating a Filecoin mining pyramid scheme

The Chinese prosecutor’s office accused the Shenzhen Shikongyun mining company, which mines Filecoin (FIL), and its four executives of creating a pyramid scheme, through which they earned 606.9 million yuan (~$83.3 million).

According to the case materials, the defendants allegedly lured clients under the guise of mining FIL on the firm’s platform. To use the service, users had to pay a fee for renting or partially purchasing equipment.

“Tempted by substantial profits, [the company and its top executives] lured individuals into further participation and deceived them with a view to obtaining assets, violating the economic and social order,” the prosecutor’s office said.

Law enforcement officials added that Shenzhen Shikongyun created the platforms filpool.io and bpool.io, and registered the domain ipfs.cn for “improper promotion of its services”.

When Chinese authorities raided the company in May 2022, they found “tens of thousands of users” on the platforms. According to the information obtained, the firm obtained most of the illicit funds through the aforementioned sites.

In November 2021, authorities arrested 31 employees of the IPFS Union company, involved in FIL mining. The authorities also seized about about $62.5 million in Ethereum, USDT and other cryptocurrencies.

One Filecoin employee told The Block, that management clearly understood the risks associated with operating in mainland China. According to him, the organisation planned to expand beyond the jurisdiction in the future.

Earlier in May 2023, the U.S. Securities and Exchange Commission staff saw indications that Filecoin was a security.