Filecoin Mining Company Faces Charges in Pyramid Scheme

• A Filecoin mining company has been charged with luring people with high profits and defrauding them through dubious means. 
• Shenzhen Shikongyun Technology reportedly established some websites to promote their operations to get more people involved.

In an unexpected twist, a Filecoin (FIL) mining company has found itself in a legal battle after being accused of an $83 million pyramid scheme. According to the report, prosecutors in Pingnan in China, which is in the Southern autonomous region of Guangxi, have charged four executives of Shenzhen Shikongyun Technology for exaggerating the profit prospect of the technology to lure investors to mine Filecoin on their platform.

From February 2021 to May 2022, almost 100,000 members signed up on the platform, earning it $83 million and almost 32 million Tether (USDT). 

The prosecutors further alleged that the company demanded participants either buy or lease its mining equipment. Customers were given a commission for adding new participants to the scheme. With this, the prosecutor found it a serious criminal offense, having realized that the firm used high returns to defraud people of their money. To reach out to more people, they created an official WeChat account to promote their operations. This was also done alongside other established platforms including filpool.io, bpool.io, and ipfs.cn. 

Reports disclose that there are plans to speed up the trial process as court session was continued after an hour recess for two straight days. 

Another Encounter of a Filecoin Mining Company with Chinese Authorities

A similar event happened in 2021 when executives of Filecoin mining and storage service provider RRMine, were cracked down by the police in Chengdu. Last year, the firm announced that it had relocated its headquarters to Singapore following the restrictions in China. 

Filecoin is a crypto asset that operates on a decentralized storage network that gives tokens to storage providers as a reward. It has had active followers in China since its launch in 2017. According to reports, a former employee of Shenzhen Shikongyun disclosed that the business had plans to grow internationally, and the executives were aware of the legal concerns involved in facilitating operations in mainland China. However, the ambition came to an end following the arrest of its executives last year. 

The recent report also underscores the continued crackdowns on cryptos in mainland China. Last month, police in northern Shanxi province arrested 21 people over suspected money laundering using stablecoin. Similarly, police in the northern Chinese region of inner Mongolia arrested 63 people in September last year for laundering a huge sum of money using USDT. This indicates the growing use of cryptos in China despite the ban. Following the collapse of the FTX empire, it was disclosed that 8 percent of its customers were based in China. 

Against the backdrop of the alleged criminal use of Filecoin by its mining firms, the decentralized storage network has recorded exponential growth with 2022 alone seeing data stored on the network increasing from 22 PiB to 215 PiB. It currently has more than 1,000 unique clients and exists as the world’s largest decentralized storage network. As of May 2023, its storage capacity was around 20 EiB. Also, its data stored was around 893 PiB. 

Filecoin has fallen by 8.4 percent in the last seven days to trade at $3.77 at the time of press time. 

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