Chinese Police Target Web3 Co-Founders for Personal Gain
Chinese police are reportedly targeting Web3 co-founders not for the purpose of serving and protecting, but rather for their own financial gain. Wuwei Liang, the brother of imprisoned CoinXP co-founder Liang Liang, recently issued a warning to executives, urging them not to hand over their private keys if detained by Chinese police. Liang stated that if the police discover and seize the money, they will proceed with charging the case with crimes and confiscating the assets. The loss of a secret key could lead to a loss of everything, including life, wealth, and wrongful imprisonment.
In May, Jun Zhao, co-founder of Multichain, was arrested by Chinese police, leading to the closure of China’s largest cross-chain protocol. Zhao held control of all protocol MPC nodes, private keys, and investors’ funds, leaving the protocol and users’ assets vulnerable. While cryptocurrency exchanges, mining, and initial coin offerings are illegal in China, owning cryptocurrencies directly is still legal. However, there is ambiguity surrounding crypto projects outside of prohibited categories. Liang asserts that law enforcement projects driven by profit are primarily interested in money, using the example of CoinXP’s case.
Liang Liang founded the CoinXP blockchain and its ecosystem DApp Hubdex in 2018 after raising 13,000 Ether through an initial coin offering. However, Liang and other developers were arrested in April 2021 by Chinese police on charges of “illegal use of information networks.” Authorities subsequently shut down Hubdex, and Liang’s charges were upgraded to include “illegal solicitation of public funds” and “multi-level marketing,” which could result in the confiscation of all assets if proven guilty. During the transfer process, 20 Bitcoins disappeared and have not been recovered so far.
The ongoing trial of Liang has experienced several troubling developments. The presiding judge reportedly stated that the presumption of innocence is not a correct principle of law in the country, signaling a potential bias against the defendant. Liang’s defense attorney was also allegedly kidnapped by police at the entrance to the court and held for over five hours without cause before being released. Additionally, a bystander listening to public court procedures was detained for 10 days in jail. These incidents raise concerns about the fairness of the trial.
In light of Zhao’s arrest, individuals in the Multichain Telegram community expressed pessimism about the ongoing Multichain saga. It appears that third-party tracking companies may provide clues to the police, leading to the arrest of co-founders who are in China and have funds. This implies that co-founders may face a high risk of being targeted by Chinese authorities.
Despite these challenges, China remains bullish on blockchain technology, particularly when under government control. Shanghai has laid out a two-year plan for advancing blockchain infrastructure, aiming to launch the Pujiang Digital Chain by 2025. This initiative involves integrating computation, public services, and government affairs. Chinese President Xi Jinping has also emphasized the development of central bank digital currencies for local currency trade settlements between friendly countries. Furthermore, communist party officials in cities like Kunming must incubate blockchain applications and support the growth of competitive blockchain companies.
In other crypto-related news, South Korea has introduced new regulations mandating that crypto exchanges partnering with banks for withdrawals and deposits must accumulate a reserve to fulfill liabilities to users in the event of hacking or computer failure. The maximum reserve amount is set at 30% of the daily average of deposits, with a compensation limit of $15.7 million. Meanwhile, Halogen Capital has become the first regulated digital assets fund in Malaysia, receiving a full license to manage cryptocurrencies and offering Shariah-compliant Bitcoin and Ethereum funds.
These recent developments highlight the challenges faced by Web3 co-founders in China as they navigate legal uncertainties and potential police targeting. It is crucial for executives to remain vigilant and protect their private keys to safeguard their assets in this complex environment.
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