China Is Planning ICO Crackdown, Threatens Life In Prison For Crypto Fund Fraud

Tyler Durden's picture

Earlier this year, Chinese digital currency exchanges temporarily halted customer withdrawals to upgrade their AML controls at the behest of financial regulators. The halt, which lasted for months, caused a temporary chill in the local bitcoin market, causing China to forfeit its position as the world’s largest bitcoin market. Now, Chinese regulators have signaled that they intend to stage a similar crackdown on initial coin offerings, the latest blockchain-related investing craze.  

According to CoinDesk, draft legislation meant to curb so-called "illegal fundraising" includes a provision that targets ICOs.

Here’s more from CoinDesk (translation theirs).

"If the department overseeing illegal fundraising activities found a fundraising without proper permission, or a fundraising that violates the relevant provisions of the State, and if one of the following circumstances is found, the department shall launch an administrative investigation. Other relevant departments shall cooperate with the investigation.

(2) to raise funds in the name of issuing or transferring equity, raising funds, selling insurance, or engaging in asset management activities, virtual currency, leasing, credit cooperation and mutual funds..."

According to CoinDesk, the draft would require the government to establish an interdepartmental committee to combat illegal fundraising. It also clarified that participants of illegal fundraising would be responsible for their own losses. The release of the draft legislation follows widespread outrage directed at cryptocurrency-related scams. Last month, several college graduates in Tianjin, China were found dead after being imprisoned and assaulted by members of a pyramid-selling organization.

Two Chinese laws presently govern how criminal courts handle unlawful fundraising.  According to CoinTelegraph, the crime of illegally absorbing public deposits carries a maximum penalty of 10 years of imprisonment. The crime of fund fraud, meanwhile, carries a maximum sentence of life in prison.

Now the question is, if such heavy-handed penalties are tied to the law currently under consideration, will the law have a chilling effect on the ICO market? Or will it successfully eliminate fraud and abuse?

According to a team of analysts at Pitchbook, ICO have raised more than $1 billion this year, and are expected to raise as much as $1.7 billion. Earlier this month, the SEC ruled that tokens produced in ICOs meet the definition of a security, and therefore must be registered with the commission. Though exactly how ICOs will be regulated in the US remains somewhat vague.


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ET's picture

In America the penalty for counterfeiting used to be death.

spag's picture

now you get promoted to partner... isnt progress great?

Silvery Dan's picture

Bitcon [sic] is worth $100-$300 according to the wsj... $200 or so according to Rickards. Trade accordingly.


Silvery Dan's picture

Hopefully you read this before the ZH Joos delete it. This website is not what you think it is.

apocalypticbrother's picture

Orange joo glad i am not in a mood to make fun of the hebez right now?

misalkin's picture

Maybe China will back up btc with gold. 1kg of gold per btc

Troy Ounce's picture


Is that before or after the stampede?

Manipulism's picture

The Moscow Exchange is working on a mechanism to regulate trading in bitcoin and other digital currencies. At the same time, the Russian Finance Ministry says bitcoin resembles a pyramid scheme, and trading should be limited.

MANvsMACHINE's picture

It depends on who is doing the counterfeiting. If it's you or me, it might as well be death. For the Fed though, it's what they're about.

tmosley's picture

If they try hard, they can drive it off shore, but that's about it.

malek's picture

"off-shore"   < facepalm >

tmosley's picture

Your grammar is bad, and you should feel bad.

Seasmoke's picture

Why do the BitCoin pictures always show GOLD coins !!!!!!!!

MANvsMACHINE's picture

Those are gold plated Tungsten.

CJgipper's picture

Just like all of the "gold bars" the Chinese are hoarding

adr's picture


Just doesn't look good in a pile. 

Bay of Pigs's picture

Because they are finite, mined, and real?

Do I need a s/?

ET's picture

Bitcoin is not a coin and is certainly not made of gold.

Most would consider this to be False Advertising.

sinbad2's picture

Because it makes it easier to sucker people.

Everybody is on board, the media, the western governments say nothing, it's a US fundraiser.

Golden Phoenix's picture

For noob idiots like you. The rest of us understand what 358 satoshi is.

xrxs's picture

So how do you really feel about it?

aloha_snakbar's picture

The Birth of Bitcon

Two friends, Bob and Satosh are sitting around after an evening of consuming copious amounts of some especially wicked dank. Bob says to Satosh:

Hey Satosh... I have a genius idea

Yeah, what is it?

You know that app you coded...the one that churns out the useless SHA algorithms?


LOL...lets sell them as digital currencies! are fucking wasted, here, have another bong

No, seriously. We get that graphic artist you know create a slick image of a 'gold' coin, and then we can further confuse the rubes by telling them their 'coins' have to be "mined", as if they were real, physical metals!

Dude... you are insane! What kind of moron would buy something like that?

Bob: Oh... I dont know. Remember that now worthless token you paid stupid money for on WoW?

They sit there and stare at each other for a moment, and then both burst out into torrents of tear stained laughter

They are still laughing today.

The rest is history


Anyone remember BetaMax? Yeah... me neither...LOL...

MillionDollarButter's picture

Dimes to dollars they are using blockchain on nuclear subs to solve the Byzantine Generals' problem.

Golden Phoenix's picture

The Birth of Goldcon

Two friends, Boob and Shittish are sitting around after an evening of consuming copious amounts of some especially wicked dank. Boob says to Shittish:
Hey Shittish... I have a genius idea
Yeah, what is it?
You know that gold we have that's doing nothing but going sideways for years?
LOL...lets sell it! are fucking wasted, here, have another bong
No, seriously. We sell it then invest the profits in something that actually goes up. When our profit doubles we'll buy the gold back for a lower price from the same guys we sold it to!
Dude... you are insane! What kind of moron would buy an investment with no return like gold?
Boob: Oh... I know! We'll tell them they're 'storing value'!
They sit there and stare at each other for a moment, and then both burst out into torrents of tear stained laughter
They are still laughing today.
The rest is history

Raul44's picture

This is one of those rare, opposing ideas where both are true.

Exponere Mendaces's picture

You can just feel the butthurt dripping from this one.

What's wrong, the recent war-stoked pop in Gold not enough?

Gold: $1,316

Bitcoin: $4,590

You better get a few more wars going, lol.

What's even better is this idiot has missed out on the several hundred-percent gains THIS YEAR. But yeah, stick with gold - your government wants your money.

adr's picture

Just when I was going to launch HoreInWahlCoin. 

ebworthen's picture

"So it begins..."

Mordor will never allow the Hobbits to use crypto to evade Sauron.

Conax's picture

They'll squish you with a tank, man.  I wouldn't make a move on their financial turf if I lived in the country. Your momma might have to pay for the round they cap you with.

wisefool's picture

His name was Timothy Geithner.

No Sarc. In China, if you cheat on your taxes, they execute you. They Do not put you in charge of taxes.

DelusionsCrowded's picture

Fools gold as they say . Sheeple can be tricked into just about anything .

Health fads are a great one . Little bit of quasi science , vwola ..

Didn't China have some magic ant craze a few years ago , and authorities had to step in ?
Then there Foolin Gong ; first class ticket to heaven , none of the awkward explanations .

sinbad2's picture

I thought these crypto currencies were a US plot, now I am sure.

CJgipper's picture

Fyi, this article is about alt coins, not bitcoin.  It's not surprising that the people missing out on bitcoin can't understand the difference.


Now what's interesting is the Chinese are so scared of their own currency that they'd dump money into obvious scams just to get out of yuan, so much so that the government is cracking down on the scams. 

Exponere Mendaces's picture

Meanwhile nobody gives a shit and Bitcoin is rallying hard -- new high $4,649.

But keep rambling on about "bans" and shit, like it really matters. lol.