Police in China have seized assets worth 400m yuan (£46m) and arrested dozens of people in connection with a suspected Filecoin mining scam.
Chinese state media confirmed that Fengxian County Bureau had arrested 31 members of IPFS Union Star Alliance for their alleged role in a multi-level-marketing fraud.
Police seized millions of pounds worth of digital assets including Ethereum, Filecoin and TEDA coins according to a statement from the Xuzhou Public Security Bureau. It is as yet unclear whether IPFS Union is being accused of being directly involved in a Ponzi scheme or knowingly allowing its distributors to sell equipment that did not exist.
In a statement IPFS Union reportedly said that Filecoin mining equipment had been purchased from the company by customers who were using illegal funds. The statement claimed that its employees were simply assisting police with their investigation.
IPFS Union is one of the world’s largest providers of storage space on the Filecoin network. Filecoin is essentially a decentralised version of drop box where miners earn FIL token for renting out storage space on their computers to network users.
If mining equipment sold by IPFS turns out to be fake it would not be the first time that investors in crypto-skeptic China have been targeted by a Filecoin scam.
After Protocol Labs raised $200m to launch the project in 2017 scammers capitalised on the hype by selling fraudulent mining equipment before to investors before the Filecoin network was even officially up and running. In 2019 Chinese media reported that one Filecoin mining scam had raised as much as $300m.
FIL token is currently trading at $62.14, down by 73 per cent compared to its all time high of $236 reached in April 2021.