Weihai sounds the alarm: how scammers are exploiting Chinese crypto

The port city of Weihai, in Shandong Province in eastern China, has issued an unequivocal warning to investors: scammers are heavily using the concept of blockchain to disguise illegal Chinese crypto operations. The local financial authority has urged vigilance in light of a surge in scams exploiting renewed interest in blockchain technology.

Although cryptocurrency trading and ICOs have been banned in China since 2017, the regulatory environment has become more complex after President Xi Jinping promoted blockchain technologies as a strategic opportunity. This openness has created a paradox: while the government encourages legitimate blockchain innovation, malicious companies pose as blockchain startups while exploiting investors.

The Multiple Faces of Fraud in the Chinese Crypto Ecosystem

Scammers have developed sophisticated strategies to attract Chinese investors. According to Weihai authorities, some illegal operations deliberately host their servers abroad to evade Chinese oversight, while actively promoting their products on social media to the Chinese public. Transactions are generally processed via online payment apps, making it significantly more difficult to recover funds once they cross borders.

Beyond offshore locations, fraudsters use advanced marketing tactics to seduce investors. They rely on celebrity endorsements and popular yet complex technological jargon to boost the credibility of their projects. Once investments are collected, these operations generate profits by artificially manipulating cryptocurrency prices and imposing strict restrictions on cash withdrawals.

Classic Criminal Schemes Revisited

Weihai authorities have identified several particularly concerning types of scams. Ponzi schemes reappear regularly, promising investors impossible returns and strong appreciation of digital assets. These scammers use false information to maintain trust before the inevitable shutdown of the platform.

Coordination among multiple local authorities—including the police department, Weihai branch of the central bank, and the China Banking and Insurance Regulatory Commission—indicates the perceived severity of the issue. These agencies have announced targeted inspections of unapproved ICOs and cryptocurrency exchanges.

How Investors Can Protect Themselves

In the face of these risks, Chinese crypto investors must exercise increased vigilance. The first instinct is to clearly distinguish legitimate blockchain projects from disguised cryptocurrency trading operations. Authorities emphasize that merely using the term “blockchain” does not prove legitimacy.

Investors should verify the physical location of servers, demand transparency about management teams, and be wary of promises of exceptional returns. The presence of celebrities in marketing communications should not obscure the fundamental analysis of the project.