Chinese police unearth multi-million dollar DeFi rug

Beijing’s crackdown on cryptocurrencies continues at the start of the new year, with Chinese police freezing nearly 6 million yuan ($1 million) worth of cryptocurrency and arresting eight people involved.

According to reports post In Nikkei Asia, the Chizhou Public Security Bureau uncovered a crypto-carpet-pulling scam that could be worth 50 million yuan ($7.8 million). Police launched an investigation after an investor lost 590,000 yuan worth of cryptocurrency in June last year. Threads from the investigation led to eight people living in different provinces. Police also confiscated luxury cars, villas and other valuables allegedly purchased with the stolen money from the defendants.

Decentralized finance (DeFi) scams lure investors with the promise of high returns in exchange for liquidity. However, after the investors put their funds in, the scammers laundered the money from the anonymous pool and took all the funds. Chizhou police said:

“After investigation and analysis by the police task force, this case is a typical case of illegally obtaining virtual currency using blockchain technology.”

Carpet pulling has become one of the most common scams in the DeFi space because it is relatively easier to succeed.According to Chainalysis, investors More than $2.8 billion in carpet pull losses in 2021. These types of scams usually offer great returns for investors, and once the pool gets enough money, the scammers run away with all the money. According to the Chainalysis report, “Carpet pull has become the scam of choice for the DeFi ecosystem, accounting for 37% of all crypto scam revenue in 2021, compared to just 1% in 2020.”

related: CertiK identifies Arbix Finance as a rug pull, warns users to avoid

While cryptocurrencies used for criminal activity are estimated to make up about 1% of the total circulating supply, the increasing number of scams in the DeFi space has affected investor confidence. However, it’s also important to note that these scams often exploit vulnerabilities in the end user, rather than inherent problems with encryption.Top 15 Big Data pull the rug It’s clear that most of the biggest scams happen with new coins that promise high returns.