The crypto community is gun-shy these days.

According to what Youbi.io reported on 4th February, ARTS, the ICO project listed on a overseas exchange, was accused of committing fraud and a “mass incident” broke out when angry investors took Jiang Jie, founder of the project, forcibly down to the Beijing Municipal Financial Bureau. Jiang is now held by police and the project is defined as “financial fraud”.

On the same day, the People’s Bank of China-affiliated Jinrong Shibao (Financial News) published headlines that a series of regulatory measures would be taken to curb domestic and offshore ICOs and virtual currency trading, including shutting down relevant businesses and online cryptocurrency exchanges .  

About a week ago on 26th January, The National Internet Finance Association of China (NIFA) issued a public note of risk, stating it was brought to attention the situation that some investors turned to overseas trading and warning investors that “these trading services all have potential risks like system security, market manipulation and money laundering.”

It is evident that regulators are taking a tough stance. The ARTS project, triggering the so-called “mass incident”, is likely to be the last straw that breaks the camel’s back.

ARTS issued 1 billion yuan in total at the ICO on 8th January, with its token valued at 0.66 yuan. On 20th January, ARTS was listed on U-COIN when its token fell below its offer price. The trading is now suspended, before which the token dropped to 0.13 yuan, and yet it was initially sold at 0.66 yuan to early backers of the project. This is why investors started a petition, reported the scam and went straight to the fraudster to defend their rights.

In fact, since the 8th January ICO, there have been constant reports of scandals about ARTS, unveiling the dark side of the crypto community.

False advertising of a fraudulent project

The second day after the ICO, news broke that the project falsely advertised itself by using Artschain’s information. Artschain has released an announcement saying that ARTS completely copied its content and Artschain is unrelated to the project. What’s more, ARTS deliberately raised funds under the name of Artschain during its teaser campaign and fraudulently used Artchain’s domain name and brand while broadcasting text messages about its ICO, which means even ARTS' own identity was falsified.

In the statement, Artschain condemned ARTS for “duplicity” and as “a shameless act” in collusion with the crypto community.

Apart from a fraudulent project, the rumour that He Huan, founder of BSC, supported ARTS’ campaign as a consultant has been refuted.

On the other hand, most investors, failing to study the whitepaper which states what the project is about, can only make investment decisions by following the advertising campaign which features renowned agencies, eminent members of the startup team and “Big Vs”, i.e. influential commentators on China’s social media. Jiang Jie claimed in a video posted online, “Concerning Bican’s report, I would like to clear the air that He Huan has nothing to do with ARTS. He was later added (to the campaign materials) by Hong.”

Some insiders also revealed that the ARTS team boasted that the project would be listed on the top three mainstream exchanges. And the promise was never delivered.

Infighting and wirepullers

Suspected of fraudulent advertising, ARTS was faced with requests for refund. Judging from the screenshots from ARTS’ group chat, members of the ARTS team diverged greatly on whether to refund the investors or not. Jiang Jie as a co-founder promised the refund in the group chat, but he later backed out and instead suggested compensation. However, the investors were obviously not buying it and insisted on a refund for the tokens bought.

While the situation deadlocked, internal strife broke out and Jiang Jie was stripped of the title as co-founder. It is said that Jiang Jie’s promise for refund apparently touched upon the profits of the team as well as distributors; not only the team but also the distributors and cornerstone investors would have to return their tokens and thus lose profits.

The de facto leader also surfaced with the infighting; it is Hong Queting rather than Jiang Jie who controlled the project. In the above mentioned footage, Jiang Jie claimed himself to be a victim as well and it is Hong who had the actual control, “(I am) like others cheated by Hong who had their name included in the whitepaper.” Some media reported that Hong established 51 Air Gallery and later initiated the ARTS project for the blockchain technology. However, Hong is not among the team members nor written in the whitepaper. He has been behind the scenes scheming ARTS, and it remains unknown how Jiang was “cheated by Hong”.

Today, the crypto market is growing wildly and amorphously. Tokens fall below ICO price and frauds cut and run, the impacts of which are beginning to be felt. There are opaque operations and grey areas, and it is entirely black-box from ICO to getting listed. ARTS won’t be the last crypto scandal, and clampdown will come sooner or later.

The article is published with authorization from the author 链得得 ChainDD please note source and hyperlink when reproduce. Translated by JoyceChan, working for TMTpost.