A man has been arrested in China for fraud over the sale of underpriced Bitcoin mining equipment and is awaiting prosecution.
According to state media, the man made nearly 100 million yuan ($15 million) from 50 investors within a few months.
Mining Fraudster Defaults on 3,000 Orders
The suspect has only been identified by his surname Zhang, but is from the Anhui province and is aged in his twenties, reports the South China Morning Post. It is alleged he offered Bitcoin mining hardware for sale at prices below market value. By selling a few genuine products, and making a loss, he was able to convince buyers that he was genuine. After racking up more than 3,000 orders he then disappeared.
The mining hardware sold was roughly worth the same as an Antminer S9 which has a hash power of 14.0 TH/s. At the time of the scam, the price of the equipment was worth nearly 30,000 yuan ($4,600) but he sold them for only 10,000 yuan ($1,500). However, it was on the basis that the seller pays two months in advance, giving him ample time to disappear with plenty of buyers money.
According to one of the victims, Ms Fu, he fulfilled a few orders to achieve a display of legitimacy. On each of these, he purchased the equipment at the market rate and made a 20,000 yuan ($3,000) loss on each one. After receiving little interest, this soon brought more buyers who were desperate to get their hands on such equipment in November and December when the prices of cryptocurrencies were skyrocketing.
China Central Television (CCTV) reported on Sunday that Zhang used the money he has raised to buy himself luxury cars as well as the original mining rigs for the few successful purchasers. When he turned himself in, he told police that he could not run his businesses because the price of mining rigs had increased and they had become much harder to get hold of.
Ripple CEO: China Has Too Much Control
Bitcoin mining in China is very popular due to cheap electricity even though the country has banned initial coin offerings (ICOs) and blocked access to crypto exchange websites. However, Ripple CEO Brad Garlinghouse criticized the power of Bitcoin miners in China as he believes this means cryptocurrencies are at danger of being controlled by China.
He said: “There are four miners in China that control over 50% of Bitcoin.”
He argued that Bitcoin was ‘really controlled by China’ and admitted that, although he does not see it as an effective currency, he does still own some Bitcoin. In his view, he believes in crypto for the long run and sees Bitcoin as a store of value. XRP is not mineable and cannot be held to ransom by miners, but is processed by validators who are partially trusted by Ripple.