Shenzhen’s financial crime task force issued a stark warning on Monday, exposing a surge in illegal crypto fundraising schemes masquerading as stablecoin and cryptocurrency investments.
The alert comes amid growing reports of fraudsters leveraging public interest in digital assets to promote unlicensed financial activities, including pyramid schemes, online gambling, and money laundering.
Under Chinese law, participation in such schemes can leave victims personally liable for losses, with little hope of reimbursement. Officials urged citizens to report suspicious activity, offering potential rewards for verified tips.
The crackdown follows a wave of fake stablecoin promotions, including a recent scam impersonating e-commerce giant JD.com.
How scammers exploit stablecoin hype in illegal crypto fundraising
Authorities revealed that illegal operators are capitalizing on limited public understanding of crypto terminology to lure unsuspecting investors.
“These groups misuse terms like ‘stablecoin’ to create a false sense of security,” said a Shenzhen task force spokesperson in a statement. “They promise unrealistic returns to fuel speculative mania while operating without any regulatory approval.”
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Recent scams have included fraudulent JD.com stablecoin giveaways on social media, despite the company’s actual stablecoin ambitions being limited to licensed initiatives in Hong Kong.
Investors face harsh realities under Chinese law
The warning emphasized that victims of illegal crypto fundraising schemes have no legal recourse to recover losses, and may even face penalties for involvement.
“Citizens must understand: investing in unlicensed platforms isn’t just risky—it’s potentially illegal,” warned financial analyst Li Wei of the Beijing-based Sino Global Research Group. “China’s anti-fraud laws place partial responsibility on participants in unauthorized schemes.”
The task force reiterated that legitimate investments require formal licensing, advising the public to verify credentials through official channels.
A push for “rational” investing amid crypto curiosity
Shenzhen’s government framed its alert as part of a broader financial literacy campaign, urging:
“Adopt a rational investment mindset, reject grandiose promises, and develop a clear understanding of money and risk.”
The message aligns with China’s longstanding skepticism of decentralized finance, even as state-backed entities explore regulated blockchain applications.
How to report suspicious activity
Authorities outlined a straightforward reporting process:
Contact local district financial regulators or police.
Provide details of the suspected illegal crypto fundraising operation.
Qualify for potential rewards under whistleblower programs.
The crackdown demonstrates China’s tightening surveillance of crypto-related activity, despite its 2021 blanket ban on cryptocurrency trading.
Olivia Jackson is a US-based cryptocurrency writer and market analyst with a passion for decoding the complexities of blockchain technology and digital assets. With over five years of experience covering the crypto space, she specializes in breaking down market trends, regulatory developments, and emerging Web3 innovations for both retail and institutional audiences.
Her work has appeared in leading finance and tech publications, including CoinDesk, Decrypt, and The Block, where she provides data-driven insights on Bitcoin, DeFi, and the evolving regulatory landscape. Olivia is particularly interested in the intersection of traditional finance and decentralized systems, often exploring how macroeconomic shifts impact crypto markets.
