Unpacking 4 Biggest Frauds of Blockchain Industry

Compared with the total market value of global cryptocurrency of $830 billion on January 7, 2018, the current global market value of cryptocurrency is about $200 billion, which has shrunk by more than three-quarters.


Individual investors mourn over their losses and many people express their doubts, “Where did the money go?”

Li Xiaolai said in his book that the market doesn’t entail a zero-sum game for individual investors. It is the trend of the market and the transition of the market cycle that made the money disappear.

Every author writes a book with a purpose. For Li Xiaolai, he means to brainwash more individual investors and build personal fame. There is no reason to deny that what he said is true, but what he shows might just be the tip of the iceberg.

Some people say that the money has not been taken away. The previous enthusiasm was built in the air, and now it has returned to normality. Yet, the market does not act on its own but is made up of people. There is no denial about the game between institutional investors and individual investors.

Many people make money from the market, but they don’t know the why behind their gains. This is dangerous, given that people who constantly gain from the market clearly understand the theory of this game. This knowledge allows them to evaluate their opponents, gauge their thinkings, vet their bids and exploit market trends.

Untamed enthusiasm of the crowd adds fuel to a bull market, whereas a bear market is caused by many factors.

We have seen a lot of unscrupulous people enter the market. Rather than making an effort to contribute, they are driven by the greedy need for money and gains. By taking advantage of the lack of regulations in this industry and the individual investors’ difficulty in defending their rights, these people brazenly invaded the market, showcasing a series of unlawful maneuvers that put individual investors in harm’s way.

But individual investors can grow and learn from their losses. Lessons should be summed up so that investors can become savvier. As such, we have listed the Top 5 market “elite” who are rather parasites of the market. Through these revelatory narratives, we hope the readers can take a glimpse at the volatility of a deliberately manipulated market and the immorality of people who are blinded by the insatiable urge to gain.

TOP 4 the magical girl Kaixin Wang


The name of Kaixin Wang is no stranger to many people. Born in 1998, Wang started her business by selling clothes and accessories via the QQ platform and allegedly earned thousands of dollars every month during the most profitable seasons.

Like Jobs, Bill Gates and Zuckerberg, Wang dropped out of high school in the second semester of her sophomore year to build her own enterprise. She founded SheqiBuy, an e-commerce platform targeting the post-95 generation of Chinese young people.

In January 2015, Wang appeared on Beijing TV’s entrepreneurial reality show “I am a unicorn.” “You will earn a lot of money from the post-95 generation of Chinese teenagers,” Wang affirmed. As a latecomer who entered the game ambitiously, Wang stepped into the spotlight in front of the five tech tycoons who were present on the show. A month later, Wang’s e-commerce company that was established less than a year ago received $20 million investment in Series A fundraising. The company’s high-profile investors include Jingwei Venture Capital, ZhenFund and Innovation Valley.

Wang has all the labels that media and venture capitalists want: “high school dropout,” “female,” “entrepreneur,” “post-95s.” These labels help her quickly secure attention. Wang also has an eye for the trend, targeting at these business areas that are new and trendy. SheqiBuy and e-commerce merchandise are just two examples.

The media broke the news that Wang was rough and overbearing, displaying personality defects and mental immaturity. For example, the operational data of ShenqiBuy is fraudulent, recruitment is based on an applicant’s appearance. Wang has all kinds of absurd rationales to fire employees, delay their wage payments and deny them compensations.

In October 2016, the official website of ShenqiBuy was suspended. Bo Zhu and Xiaoping Xu, investors of Wang’s company, expressed their disappointment and suggested their withdrawals.

In March 2017, Wang disclosed her new business in her Friends’ Circle on Wechat. With a focus on foreign exchange finance and education, Wang claimed to be the “CEO of New Energy Education.”

Not long after that, Wang realized that the cryptocurrency market could be a lucrative field. She entered the market quickly and got to know a lot of top executives, as shown by her photos with people of high standing.

Supported by these business magnates, Wang gathered high popularity and trust among the public, which became the foundation of her successful transition into an investment representative.


An investment representative is an intermediary entity that raises funds on behalf of individual investors. The general agency fee an investment representative charges is three to five percent, which is already financially rewarding. As the insatiable magical girl, however, Wang embarked on other businesses with the money she raised.

Taking advantage of the fact that Mingxing Xu was issuing OK coins, Wang used this opportunity to raise ETH. The angered OKcoin founder, Mingxing Xu, posted in his Friends’ Circle that “this magical girl is a liar, please call the police immediately!”

As the “Southeast Asia Alipay,” SpherePay issued SAY coins. Wang became the major investment representative of the SAY project and raised a large number of ETHs.

Greed has no limits. Wang secretly quantified the ETHs that were raised through the SAY project, whereas the rest was not even enough to pay back individual investors. With 30,000 ETHs in her wallet, Wang disappeared from the public sight, leaving behind individual investors who had nowhere to complain of their losses.


In the entrepreneurial wave of 2015, Wang was in the limelight and endorsed by deceived investors. She had no qualms about her enormous wealth, which was obtained by little work and dubious means. When she fell, it was bound to be devastating.

TOP 3 Pan Zhu 


Pan Zhu, born in 1992, is only 26-year-old. During his teenage years, Zhu spent lots of time in cyber cafes. Yet, unlike his peers who became addicted to the Internet, Zhu was secretly learning internet technology and game development while playing games. With self-built computer and technology expertise, Zhu became a hacker when he was young.

The success of Zhu in his glory days was inseparable from the help of Charles Bi-Chuen Xue, known by his screen name as Manzi Xue. The story of Zhu and Xue is de facto legendary on social media and the Internet.

As his 4931 game trading platform was in urgent need of financing, Zhu thought of Xue, who was not an acquaintance of Zhu’s. In order to let Xue know him, Zhu played dirty tricks by hacking Xue’s Wechat and Weibo account.

Xue and Zhu became so close to each other after this incident that in the Three O’clock blockchain community, Xue was full of praise whenever Zhu was mentioned. “Zhu is a genius and he is my secret weapon,” said Xue.

In July last year, Zhu invested three million in the DeepBrain Chain. At its highest point, the DeepBrain Chain allowed Zhu to cash out more than two hundred million.

Full of conceit, Zhu sent 5200.1314 ETHs to her girlfriend on Valentine’s Day to show off his wealth.


Sheer greed as his driving force, Zhu became infatuated with victory in the moneymaking business of cryptocurrency.

At the beginning of 2018, Xue’s assistant Zhao Yang and a person named Wenming Chen released a corporate credit rating project, ZJLT (the ultimate ledger), and privately raised 3,000 ETHs.

Zhu touted for this project on his WeChat/Friends’ Circle/Weibo and other social media platforms, telling everyone that the opening price for the trade was only thirty cents. Among these fans who were encouraged to buy were minors and college students. Most of them had to borrow money to buy bitcoins. There was a college student, born in 1999, who had borrowed more than $100,000.

Yet, the ZJLT fell on its first day of trading. Even now, the price continues to drop from its opening price.

Unacceptable to many investors, the drop indicated that the project itself was problematic. Yet, Zhu continued to dupe investors and the public, saying that he and Jian Zhang had a good relationship, Hadax would be launched, and ZB, as well as FCoin, would be released in two weeks. None of these promises had ever been fulfilled. Zhu tried to appease the investors and users by citing Xue’s help as a security backup.

On the evening of July 30, in a group chat of about ten people, Zhu sent a screenshot of his dialogue with Xue. Xue encouraged Zhu to work hard to complete the ZJLT project, claiming that he would offer full support. Zhu made a voice call in the group chat and cried, putting on display his guilty conscience. He is only 26-year-old and doesn’t want to be spurned by the public. He wants to get the project done.

According to Zhu, there is no need to worry about the falling price. For individual investors, they just need to hold the cryptocurrency and wait patiently for price surge. The reality backfired on Zhu and the ZJLT price continued falling.

On the afternoon of August 6, a group of protesters invaded the BEECOOL office located at Chaoyang District. Everyone was crying out, “ZJLT is a fraudulent project that takes away our hard-earned money.”


On the afternoon of August 5, protesters arrived in Beijing. On the morning of August 6, ten of them went to Zhu’s bureau to pull up the banner.

Eventually, individual investors were ruthlessly exploited. As for Zhu, he simply disappeared and run away. Rumor has it that Zhu found his shelter in Hainan to ward off the consequences.

Someone in the cryptocurrency market said, “Zhu is pretty famous in the industry. Not even having a programmer, Zhu specializes in issuing empty-shelled bitcoins. He has abused the public for too long that people finally start to defend their rights.”

In 2018, Zhu declared through his Friends’ Circle that he would permanently withdraw from the cryptocurrency market.

There are many stories of young people who become millionaires overnight thanks to cryptocurrency. Zhu may never have thought of it that after entering the cryptocurrency industry, he will be blinded by greed and become the object of everybody’s loathing.

TOP 2 Jian Zhang


FCoin’s founder, Jian Zhang, is a familiar face in the cryptocurrency industry. He started his business with digital currency in 2013 and joined Huobi in 2014. Zhang once served as the CTO of Huobi, before quitting the company in the second half of 2016. In May 2018, he launched the FCoin digital asset trading platform. With superior circulation capabilities, the platform can help tokens thrive in the crypto world.

Zhang pioneered the new era of bitcoin mining. This so-called transaction mining means to guide institutional investors to trade on the platform, giving traders daily dividends and rebates based on their trading volumes. As the price of FT coins increases, the sooner a trader joins in the transaction, the more profit he or she is able to make.

Many investors understand that they are in an opportunistic game. Knowing that there is a high risk of market crash anytime, they still revel in the gamble.

FCoin uses the concept of transaction mining to sweep the market. Its turnover exceeds that of Binance, OKEX, and Huobi in total, attracting numerous small trading companies to follow suit.

The CEO of Binance, Changpeng Zhao, gave a warning to the public when FT first came out. “Transaction mining is not only another form of ICO but also a high-priced ICO. Users should invest rationally. After using BTC and ETH to pay for the fee, users take back tokens since the platform is 100% returnable. Doesn’t that mean using BTC and ETH to buy tokens? Isn’t that identical to ICO?” said Zhao.

He also pointed out that, “For users, tokens with rebates and dividends seem to be reliable, but it is impossible for users to hold them for a long time. Neither will users continuously pay fees based upon trading volumes.” Currently, the market value of tokens is $50 billion (based upon the FT price on the day this article was published), which is already 500% higher than the total market value of cryptocurrency. In order for the market to function properly, users need to be self-disciplinary.

Many people refer to Zhang’s innovation as a creative way to exploit individual investors. His methods are constantly evolving, catching many people off guard.

According to the statistics, in July, FCoin issued 56 announcements in less than 23 days. Most of them were announcements for trading rule adjustments.

With unbelievable efficiency, FCoin set up the GEM and issued nearly 80 projects in 20 days. Yet, the likelihood of the GEM project to fall on its first day of trading was at least 70 percent.

With the surprisingly high rate of price falling, numerous projects had been released in such a short period of time. Many people started to wonder whether FCoin had an audit system? Zhang had successively launched a series of reporting mechanism, such as the recommendation system, to remedy the situation.

Zhang became the trailblazer to reform the cryptocurrency industry and felt entertained by his well-deserved new title.

Fcoin issued two empty-shelled cryptocurrencies in 50 days, first the FT and then the FCandy. On July 19, FCoin announced its launch of FCandy, which was a new form of trading token.

Zhang held 45 percent of the Guten shares, and the Guten project (token name as GU) raised a total of $80 million FTs. According to the FCoin announcement, the opening price of GU was 0.01 USDT. Not long after that, however, the price fell below its opening price to as low as 0.0007 USDT.

People accused Zhang by saying that GU was a registered company owned by Zhang. The company was used in such a way to exploit its own investors.

Since its birth, Fcoin has been issuing new rules and announcements as frequently as possible, including the FT1808 warrants, the FCoin fund and many more. With a variety of ways to manipulate and dupe individual investors, Fcoin is able to avoid capital chain ruptures, creating a thriving atmosphere in order to lure investors.

With the rapid decline of FT token prices, the amount of transactions has shrunk sharply. The frenzy about FCoin has finally been arrested.

The price of FT token has dropped from its highest value of nearly five yuan to 20 cents, whereas its market value has changed from $5.5 billion to $500 million now, shrinking by more than 90 percent.


In fact, Zhang is not the first one nor the last one to abuse investors by mass production of cryptocurrency. We need to be more wary of these people who constantly change the rules of the game and care only about efficiency.

There is no magic in this world. These people are always good at lying and putting other people’s money into their own pockets.

TOP 1 “the Martian” 


Since August 2017, the HSR led by the “Martian” has rushed to the top of the list and become a breakthrough. Many people have recognized its value and charm.

In just half a year, “the Martian” took advantage of the cryptocurrency frenzy to push HSR to a new height.

“The Martian” educated individual investors on cautionary investment, reminding them of the unfeasibility of short-term investment and the danger of caring only about the rise and fall of cryptocurrency price. Yet, on the other hand, using his own advocacy ability, “the Martian” gave the cryptocurrency price roller coaster rides two times in a roll. Knowing that there was a huge amount of money to be earned thanks to these enormous transaction volumes, “the Martian” barely cared about the interest of his investors, taking delight in his own marketing capacity.

The sudden rise to riches in the cryptocurrency industry attracted more individual investors than ever. These individuals took “the Martian” seriously, and “the Martian” community became a representation of the HSR. People bound HSR and “the Martian” closely together as if any words said by the latter were inextricably linked to the rise and fall of the former.

“The Martian” pushed the HSR to a new height by using exaggerated gimmicks. He claimed that by the end of 2017, HSR price would surge to 1,000 yuan. If that were not the case, he would live broadcast eating poop.

Aiming at the 1,000 yuan myth, many people believed in every word said by “the Martian.” The price of cryptocurrency fluctuated 25 hours a day. As of the midnight of December 31, 2017, the price only broke at 1,000 on 185.

On November 16, HSR reached its climax when Okex went online. At 7 p.m., Okex’s live broadcast room was crowded with viewers. When the host asked if the HSR could surge over 1,000 at the end of the year, however, ”the Martian” frankly replied that what he said previously was simply a joke. The price of HSR plummeted and fell by 30 percent in an instant. Since then, HSR’s price has become sluggish, and HSR is dubbed as “an over-burnt red meat” by investors.

At the end of the year, “the Martian” took a bite at something that symbolically represented the poop, proclaiming the end of a braggart’s farce.


Some investors were stuck in the scandal and others had to reluctantly let go their losses. For those who had put their entire net worth on the HSR, it came as no surprise that they had been highly critical of “the Martian.” The price of HSR had since then fallen more than a dozen times to as low as 20 yuan, leaving many investors tied up in the market.

As the person in charge of the Super Cash, “the Martian” stopped making announcements on Weibo about potential “red meat” to be exploited after his eating show. He appeared on other platforms to give endorsements, such as HPY、DIC、HPS、ENT and also strongly recommended the AV chain. Interestingly, whenever “the Martian” is involved, the project often performs poorly.

On January 26, “the Martian” made an announcement to withdraw from the cryptocurrency industry indefinitely.

Money earned and ready to leave! “The Martian” announced his withdrawal from the blockchain market!

“The Martian” deleted all posts on Weibo and quitted the relevant Wechat group. Some people suspected that furious investors threatened him. There were also guesses that he received life-threatening messages.

An investor threatened “the Martian” with the following words:

“Hey Martian, I was born in the Northwest and I am also a veteran. I participated in both the HSR and the HPY investments. The reason I joined in these gambles was that I was fooled by your false propaganda. I am calm and I just want to tell you that if I know where you are in China or what activities you are in, I will stain my knife with your blood.”

A project owner’s casual word needs investors to bear the consequences and pay for the bill. No matter the purpose, such a gambling game has no standards and is too shameless!

Conclusion Remarks:

Nietzsche once said that “If thou gaze long into an abyss, the abyss will also gaze into thee.” Many people enter the cryptocurrency industry with the romantic idea of getting rich overnight but end up being consumed by an insatiable desire to make money and gain.

It was the best of times. It was the worst of times. It was an age of investment and progress, but also an epoch of deceit and deception.

People say that the rise and fall of cryptocurrency in one day may well exceed the fluctuation of other assets in an entire year. That may well be true. In the cryptocurrency world, you see the absolute worst in human nature. Some people try all means to make a profit, and others become runaway bosses.


Human eyes speak volumes. Next time when you see these people, please keep away!

The scam will eventually be exposed. Fortunately, after all the twists and turns, we have seen many institutional investors stick to the true value of blockchain. The immense potential and great vitality of blockchain will drive the digital transformation, helping humans live better.

We believe that blockchain will leave its imprint in human history. Fairness, justice, and transparency have been the eternal pursuit of humanity. Thanks to blockchain, with the help of digital technology, this goal finally becomes attainable.

As an individual investor, though we don’t have an institutional investor’s enormous asset base, we share the same market. By raising awareness and expanding our knowledge reservoir, we will acquire all the leverage we need to succeed.

Blockchain’s broken promises will be replaced by other forms of technological discovery, which will continue to boost the cryptocurrency industry.

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