{"id":5569,"date":"2020-06-08T13:16:31","date_gmt":"2020-06-08T17:16:31","guid":{"rendered":"http:\/\/cointelegraph.com\/magazine\/?p=5569"},"modified":"2020-06-08T13:48:11","modified_gmt":"2020-06-08T17:48:11","slug":"wild-east-ico-boom-china","status":"publish","type":"post","link":"https:\/\/cointelegraph.com\/magazine\/2020\/06\/08\/wild-east-ico-boom-china","title":{"rendered":"Wild, Wild East: Why the ICO Boom in China Refuses to Die"},"content":{"rendered":"

For many people involved in the international crypto space<\/strong>, the idea of throwing valuable Ether tokens at comically named blockchain projects in anticipation of unworldly profits now seems a laughable and distant memory.\u00a0<\/span><\/p>\n

There is little doubt that what we experienced with the 2017-2018 Initial Coin Offering (ICO) mania was a once-in-a-generation phenomenon, the somber aftermath of which will perhaps live longer in the memory than the euphoria of December 2017.\u00a0<\/span><\/p>\n

In hindsight, one cannot help but wonder how investors were na\u00efve enough to believe in all those grandiose claims of blockchains solving every imaginable problem in the world, or how they thought they could get into an ICO token listing early and get out in profit with impeccable timing.<\/span><\/p>\n

While the crypto industry in the West has seemingly matured since those wild days, with a growing focus on institutions and innovative trading products, the landscape remains quite different in China.\u00a0<\/span><\/p>\n

Despite all the lessons learned from 2017-2018 and growing sophistication among retail investors, various crypto-related Ponzis, MLM schemes, and pump-and-dumps are still very much alive in China today. Even for a seasoned observer of the China crypto scene who has seen the recurring themes, this can still be baffling. Considering the magnitude of some spectacular Chinese exit scams such as <\/span>PlusToken<\/span><\/a>, <\/span>Wotoken<\/span><\/a>, and the <\/span>Fcoin debacle<\/span><\/a>, one cannot help but wonder – when will people learn?<\/span><\/p>\n

Scams aplenty<\/h3>\n

Matthew Graham, the Beijing-based CEO of Sino Global Capital, regularly decrypts the Chinese crypto scene for Western Twitter users:<\/span><\/p>\n

\u201cAlthough the situation has improved somewhat, it\u2019s unfortunate that scams and Ponzis are still a common feature of the China crypto ecosystem”, says Graham. \u201cMany of these schemes are regional in nature, are associated with veterans of China\u2019s P2P and MLM industries, and feature common players. The largest scams such as PlusToken make international headlines, but there are many more examples.\u00a0<\/span><\/p>\n

For instance, an alleged scam called V-Dimension (or VDS) claimed to help users create \u2018passive wealth flow.\u2019 VDS marketed itself with a \u2018V for Vendetta\u2019 theme, complete with masks and cheesy music and lines. Keeping with the theme, \u2018investors\u2019 had to use the Tor network to access the project\u2019s whitepaper. This VDS project even is listed on a fairly popular China-centric exchange, but needless to say it hasn\u2019t gone well.\u201d<\/span><\/p>\n

Graham\u2019s sentiment is echoed by others who are familiar with the crypto scene in China. Mr. Z, a formerly active crypto speculator in Shanghai who asked to remain anonymous, explained that \u201cIn China, we often see two main types of scams, one being illegal MLM schemes such as PlusToken, and the other being malicious pump-and-dump ICOs like many of the no-name tokens out there.\u00a0<\/span><\/p>\n

The situation today is already a lot better than a couple years ago, with there being way fewer ICOs and it being more and more difficult for token issuing project teams to make money. Although you can still find retail investors who are interested with the hopes of making a quick buck, these people are now few and far in between compared to back in 2018.\u201d<\/span><\/p>\n

Chive talking<\/h3>\n

In China, the retail \u201cbagholders\u201d who lose money via misplaced speculation or MLM\/P2P lending exit scams are pejoratively known as \u201cleek\/chives\u201d (\u97ed\u83dc), and when schemers dump their tokens on these speculators the act is known as \u201cchive cutting\u201d (\u5272\u97ed\u83dc).\u00a0<\/span><\/p>\n

This endearing terminology is derived from the fact that when you chop off the tip of a chive, it will soon grow back again; just like the wave after wave of retail speculators driven by greed and desperation.<\/span><\/p>\n

Mr. Z described these people as becoming increasingly elusive. \u201cNew \u2018chives\u2019 in crypto are harder and harder to find now, and a lot of the people who are still buying ICOs today are actually older \u2018chives\u2019 who either made or lost money previously who are still holding out hope for one more lucrative opportunity. <\/span><\/p>\n

In the meantime, many of the newer MLM schemes have now moved to the third and fourth tier cities, targeting forty-plus middle-aged people with savings who understand very little about blockchain technology or the financial markets, but are still prone to being lured by the promises of quick and guaranteed returns. These \u2018chives\u2019 will typically spread the message by word of mouth with their friends and relatives, to bring more people onboard.\u201d<\/span><\/p>\n

Insights from Graham and Mr. Z, combined with my own experiences, paint a clearer picture of the reality in China\u2019s crypto scene. China is a large country with significant regional divides not only in culture, food, and habits, but in the dissemination of information. The highly guerilla and agenda-driven nature of China\u2019s crypto media space means that for many retail investors it is nearly impossible to distinguish the good information from the bad. KOLs and WeChat-based syndicate groups are very common, not dissimilar to the syndicates and paid trading groups that flourished during the peak of the ICO bubble in the West.<\/span><\/p>\n

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