A leading project powered by Filecoin has run into a legal hurdle in China where the company running the project has been accused of operating a pyramid scheme.
In a recent public hearing, the People’s Court of Pingnan County heard the allegations leveled against five defendants associated with the Shenzhen Space-Time Cloud Company, the company behind the alleged scheme that pilfered millions.
Shenzhen Space-Time Cloud Company was established by Lai Mouhang and Lai Moujun in June 2018 and the two of the defendants — Liang and Hu — joined the team in the following months. The prosecution has alleged that Lai Mouhang scaled the firm’s operations in 2019 with ipfs.cn domain name to promote investment prospects of Filecoin’s economic model.
Filecoin’s framework includes a block rewards mechanism where miners who are roped in to validate new blocks are rewarded with the FIL token – Filecoin’s native cryptocurrency. Prosecutors stated that Lai Mouhang and his team members created a scheme that was allegedly “inspired” by the model. They created the filpool.io portal to promote joint mining under the pretext of selling storage servers for mining the FIL token. The portal served as a prime center for the defendant’s alleged fraud. The accusations have had an impact on live cryptocurrency prices including those of some Top 10 cryptocurrencies. The prosecution has also alleged that the defendants inflated the potential profits that could be earned by their platform.
The manipulation reportedly encouraged participants to fall for the scheme and be lured by the high returns.For example, if a participant buys at least eight terabytes of cloud computing storage, they would be eligible for a bronze membership or higher. The high rewards soon lured many crypto users to follow. The higher the amount invested, the higher would be the promised rewards. Apart from filpool.io, the defendants had rolled out another portal as part of their pyramid scheme — bpool.io. The number of participants who registered on filpool.io, stood at 57,122, while those associated with bpool.io platform stood at 143. With the scheme, the accused collected over $83 million, plus $8.5 million in other cryptocurrencies.
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