Philippine Crypto Scam Raid Sees 277 Chinese Arrested

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A crypto scam that emanated from the Philippines but targeted Chinese crypto investors has been shut down following a raid in the Philippine town of Pasig City that saw 277 Chinese nationals arrested. Local news outlet the Philippine Daily Enquirer reported that the scam is part of a rising trend that has seen Chinese nationals perpetrating crypto-related scams through legitimate Philippine-registered companies.

Police Crack Open Grapefruit

The raid, which took place on September 11 and was conducted by the Bureau of Immigration following a tip from the Chinese Embassy, targeted Grapefruit Services Inc., an authorized service provider of Golden Millennial Quickpay Inc. Ltd., itself an offshore cryptocurrency company licensed by the Cagayan Economic Zone Authority (CEZA). More than a thousand Chinese nationals had apparently already fallen victim to the scam, with the police initially only suspecting four individuals were responsible. However, when they arrived at the Grapefruit offices they discovered a 273-strong army of Chinese immigrant workers “in the act of conducting illegal online operations.” CEZA is a government-owned corporation that oversees and promotes two special economic areas in the north of the country, with the aim of attracting foreign and local investment. The Philippine government opened the doors to cryptocurrency firms in the areas in April 2018 with the hopes of making it the country’s cryptocurrency hub. Manilla recently saw its first Bitcoin ATMs installed as a sign that the country wants to get into the cryptocurrency industry.

CEZA Seizure Highlights Bigger Issue

Immigration authorities have been keeping a close eye on operators like Grapefruit since the CEZA concept was introduced. Grapefruit’s registration documents expressly prohibit the company from undertaking any activities as securities brokers or dealers, or as investments advisers/investment company. Grapefruit is also barred from operating a currency exchange, including fiat and virtual money. Companies who come under the CEZA umbrella are allowed to hire foreign individuals on CEZA visas, meaning they are restricted to work only in CEZA areas. This has led to a trend of Chinese workers moving to the Philippines to work in the cryptocurrency sector, something that has caught the attention of immigration authorities. The scale of the Grapefruit operation clearly took the authorities by surprise and will inevitably lead to an increase of awareness of the issue, which is much bigger than was initially realized.