In a surprising development, Shikongyun, one of China’s prominent companies, is facing allegations as local prosecutors have filed a lawsuit against the company for allegedly orchestrating a pyramid scheme involving nearly $100 million.
This recent legal action has triggered a broader investigation into various Filecoin companies and their founding teams by Chinese authorities.
The wave of allegations has sent ripples through the cryptocurrency market, shaking investor confidence in Filecoin’s reliability as a secure investment.
This controversy raises questions about the robustness of due diligence measures within the industry and the regulatory landscape in China.
At present, the majority of Chinese companies linked to Filecoin find themselves under the watchful eye of law enforcement agencies.
The court, located in Pingnan County within the Guangxi autonomous region, recently commenced proceedings against Shenzhen Shikongyun Technology and its executives, including its founder Lai.
These individuals stand accused of masterminding and executing pyramid scheme operations.
Prosecutors allege that the defendants lured individuals into participating by posing as a platform for mining Filecoin.
Allegedly, they required prospective participants to pay fees for purchasing mining equipment or leasing mining machines, falsely promising substantial returns on investment.
The alleged wrongdoing of Shikongyun went beyond deceptive practices. The company is accused of setting up platforms such as filpool.io and bpool.io, as well as using the ipfs.cn domain name to inappropriately market its services.
By May 2022, Chinese authorities had intervened, uncovering the company’s extensive user base and its accumulated 606.95 million yuan (approximately $83.3 million) through the platforms in question.
Sources suggest that Shenzhen Shikongyun was aware of the regulatory risks associated with operating in mainland China.
Before the arrest and detention of its executives last year, the company was reportedly exploring expansion opportunities overseas.
A former employee disclosed that the company had ambitions beyond China’s borders, suggesting that regulatory pressures may have played a role in these plans.
The situation highlights the ongoing struggle between regulatory authorities and cryptocurrency enterprises, particularly in nations like China that maintain a stringent stance on financial activities.
As the trial progresses and more details emerge, the case of Shikongyun serves as a cautionary tale within the broader context of cryptocurrency governance.
