Chinese authorities have arrested eight people involved in a crypto scam in its latest crackdown on crypto-related activities. It also froze 6 million yuan ($1 million) worth of crypto assets tied to the crime.
Despite the clear ban on cryptocurrency trading, mining, and related activities in China, many still appear to be involved in crypto activities, albeit illegally.
The Criminals Rug Pulled Crypto Investors
According to a report on Nikkei Asia, this DeFi rug pull was first uncovered by the Chizhou public security bureau and had the potential to be worth 50 million yuan ($7.8 million).
Investigations started after an investor lost 590,000 yuan in crypto assets in June 2021, and evidence pointed to the eight arrested people.
Apart from the frozen assets, authorities also seized luxury houses, cars, and other expensive items. All these assets are alleged to have been acquired with the stolen assets.
The unnamed scam project promised investors high returns for swapping their liquidity. But the scammers used anonymous pools to siphon the money while investors were left with nothing.
This event doesn’t just show the risks of crypto assets but also proves that banning cryptocurrencies won’t protect people from the risks. Instead, the ban might further give more opportunities for bad actors to exploit the people that the ban seeks to protect.
Despite Security Concerns, DeFi Adoption Continues
Rug pulls became the number one crypto scam in 2021 as it accounted for 37% of stolen assets. The nature of decentralized finance space further makes it possible to pull off this scam due to its unregulated and permissionless nature.
With users losing almost $3 billion to rug pulls last year, security has become a major source of concern for investors.
However, the potential of the space continues to attract many investors, including institutions.
Recently, Aave launched an institutional DeFi platform, Aave Arc. Despite the overall dip in the crypto market, DeFi tokens have been the least affected. Uniswap (UNI), Aave (AAVE), PancakeSwap (CAKE), and other DeFi tokens have all had a positive rise in value in the past seven days.
Available data on DeFiLlama would also show that the TVL of assets locked in the space is currently over $230 million.
However, like Chainalysis pointed out, crypto adoption growth might be hampered if solutions are not found for the risks attached to using digital assets.