The Filecoin ecosystem is currently grappling with a damaging controversy. A major initiative based in China has been embroiled in legal proceedings, accused of orchestrating a pyramid scheme. At the heart of the controversy is the alleged misuse of Filecoin’s reward system, with reported losses amounting to a staggering $92 million.
Pingnan County’s People’s Court recently shed light on an intricate pyramid scheme involving one of Filecoin’s premier projects. The intricate scam, led by the Shenzhen-based Space-Time Cloud Company, has the potential to tarnish the reputation of the Filecoin community.
Analysing the Filecoin deception
Central to this scandal is Filecoin’s renowned block reward system, which incentivizes miners with its native FIL tokens. Space-Time Cloud Company, allegedly leveraged this system for their gains.
Under the guidance of key players such as Lai Mouhang, Lai Moujun, Hu, and Liang, the company introduced the filpool.io platform. They presented this platform as a joint mining opportunity, cleverly disguising their main objective of pushing storage servers to mine FIL. Despite Filecoin’s value, which soared to nearly $200 in April 2021, it now languishes at a mere $4.04.
Participants were hoodwinked into believing in the inflated profit potential of the company’s cloud storage technology. With promises of lucrative returns, investors were nudged to buy a minimum of 8 terabytes of cloud computing power, paving their way into the scheme and opening doors to recruit more.
Staggering data from the prosecution reveals the depth of the scam: filpool.io had 57,122 members registered, while bpool.io (another Filecoin-related venture of Space-Time Cloud) secured 143 partners. In total, these two platforms raked in almost RMB 607 million ($83 million) and an extra RMB 62 million ($8.5 million) in various digital currencies.
Allegations suggest that the group’s actions caused significant disruptions to economic structures and societal norms, thereby breaching prevailing laws.
The repercussions of this investigation could leave an indelible mark on the decentralized finance realm, extending far beyond China’s borders.
