The Haidian District Market Supervision Bureau in Beijing has concluded the city’s first investigation into a case involving illegal pyramid scheme activities facilitated by blockchain and virtual currency technology. A local technology firm was found guilty of providing essential infrastructure and marketing support for a fraudulent public chain project. As a result of the enforcement action, the company has been ordered to pay fines and penalties totaling over 930,000 yuan, marking a significant precedent in China's ongoing efforts to regulate the digital asset sector and curb financial crimes linked to distributed ledger technology.
The Role of Technical Support in Crypto Fraud
The investigation revealed that the penalized technology company functioned as an outsourced service provider for a specific public chain. Despite being aware of the project's illicit nature, the firm continued to offer comprehensive technical and operational assistance. These services included server maintenance, external publicity, exchange docking, and the management of virtual currency trading channels. By maintaining these gateways, the company directly facilitated the flow of illicit funds and the expansion of the fraudulent network.
The public chain in question operated through two primary programs:
- The "Atomic Plan", which focused on member recruitment through high-yield promises.
- The "Hathaway Plan", which required participants to invest capital to secure membership qualifications.
- A multi-level marketing (MLM) structure where rebates were issued based on the number of new participants recruited by an individual.
Legal Consequences and Regulatory Oversight
Legal proceedings intensified after public security organs identified the project as a criminal enterprise. The organizers of the public chain have been criminally detained, while the technology provider faced administrative sanctions for its role in enabling the scheme. Authorities emphasized that providing technical convenience for pyramid schemes, even as a third-party contractor, constitutes a violation of market regulations. This case highlights the increasing capability of Chinese regulators to track fund movements across blockchains and hold service providers accountable for the applications they support.
The resolution of this case on October 29, 2026, serves as a warning to technical entities operating within the blockchain space. The Haidian District Market Supervision Bureau’s action underscores that the use of smart contracts and decentralized protocols does not exempt businesses from local financial compliance laws. By targeting the support infrastructure of these schemes, Beijing aims to dismantle the technical foundation that allows virtual currency-based pyramid schemes to proliferate among retail investors.
Frequently Asked Questions
Quick answers to the most common questions about this topic.
For educational purposes only. Nothing here constitutes financial or investment advice. Crypto markets are highly volatile — always DYOR before making any decisions.
Fact-checked per our editorial policy. We maintain strict independence from advertisers. Spot an error? Let us know.