Chinese virtual currency trading scam exposed! YuZhi Fund Ponzi scheme runs off with 20 billion yuan

Chinese Yuan Zhihui Financial Co., Ltd. within China operates a capital pyramid scam under the guise of “virtual currency trading.” The company claims that investors can follow operations in Bitcoin contracts to earn a fixed daily profit of 1%, and by recruiting others, they can receive additional dynamic rewards. The minimum investment is 7,400 RMB, with a claimed cumulative return of up to 370.6% over 30 days. Assuming 3 million members are real and the minimum investment is 7,400 RMB, the scale of the pyramid exceeds 20 billion RMB.

The Perfect Scam Design of China’s Virtual Currency Trading Earning 1% Daily

The virtual currency trading scam designed by Zhihui Financial is highly deceptive. Investors are first required to purchase Tether (USDT) on global virtual currency trading platforms like Ouyi, but buying U does not complete within the platform. Instead, funds are transferred to an introducer, who then forwards them to higher levels, with the final destination unknown. The corresponding assets will then be displayed in the HSEX account. New users receive a gift of 200U upon opening an account, forming a “base position.”

Based on this base position, investors can follow the founder of Zhihui Financial, who claims to be “Chen Zhihui,” to buy Bitcoin contracts. Chen Zhihui will send a string of letters, which investors copy into HSEX to complete buy and sell transactions. Each buy operation yields a fixed 0.5% return. With two trades per day, the daily return is 1%. This seemingly professional virtual currency trading operation involves no real transactions; the total assets shown in the HSEX account are just numbers.

Dynamic earnings are the core multi-level marketing mechanism of the pyramid scheme. Investors earn high commissions by recruiting others, and the more people and funds they bring in, the higher their earnings. According to the rule “inviting newcomers to open positions can share 20% of the newcomer’s first deposit as a bonus, and the sponsor’s superior can receive an additional 5% with practical assistance,” a pyramid structure is formed. The higher the ambassador level, the higher the bonus rate for recruits. Some investors even recruit family members, such as their mothers, and then develop 20 elderly people.

Four Major Features of Zhihui Virtual Currency Trading Scam

Pretending to be Virtual Currency Trading: Claims to follow Bitcoin contracts but no real trading occurs; account figures are fictitious.

Dual Reward Temptation: Static 1% daily earnings + dynamic recruitment bonuses, claiming a total return of 370.6% over 30 days.

Impersonating Authorities: HSEX name mimics HKEX, falsely claims deep cooperation with “Hong Kong Stablecoin Exchange.”

Secondary Exploitation Tactics: After a collapse, demands a 20% deposit and 30% handling fee to withdraw funds.

Sweet Rewards Before Collapse and Despair During the Crash

The experience of Wang Qin, an investor from a fourth-tier city in Southwest China, is typical. On October 9, 2025, a friend named Chen introduced Zhihui Financial to Wang Qin, claiming he had earned several ten-thousand yuan since June. To gain trust, Chen showed a monthly rental subsidy of 500 USDT, which only required hanging Zhihui Financial’s name as a studio address in a physical store. Wang Qin invested 15,000 RMB to buy 2000U, plus a 200U sign-up bonus, forming a 2200U base position.

It takes 50 days to reach the withdrawal threshold for doubling the base position. Wang Qin had her husband invest 30,000 RMB, or 4,000U, to “enter.” According to the recruitment rules, she also received 1,000U in benefits. On November 9, her account balance reached 4,500U. She applied to withdraw 1,000U, which was approved within two hours, after deducting a 10% handling fee, arriving in her account as 900U. She then sold U in Ouyi to get 6,600 RMB. This successful withdrawal was the “sweet reward” from the pyramid scheme, convincing investors that the scam was real.

On November 26, Wang Qin wanted to withdraw again, but the annual dividend activity started, requiring no withdrawals. Daily earnings could reach 2%, and seeing her account grow by 24U daily (about 300 RMB), she was very happy. However, on December 8, HSEX displayed a notice from “Hong Kong Stablecoin Exchange” claiming Zhihui Financial was involved in money laundering and false trading, leading to increased withdrawal fees to 30% and a requirement to pay a 20% deposit of the total account amount as a self-certification deposit. After the annual dividend activity, everyone’s total account balance was inflated, and the fees to be paid also increased.

Leader Gray Industry Chain and Year-End Runaway Peak

Li Xu, a private anti-pyramid sales personnel, stated that year-end is the peak period for pyramid schemes to run away. First, recent regulatory warnings across various regions have made project operators feel threatened; second, these pyramid schemes earn enough by year-end, and investors tend to withdraw funds, leading to decreasing inflows; third, some platforms are busy rebranding and preparing for a new round of harvesting. Zhihui Financial has developed multiple similar apps like “HSEX1” and others, spreading across the country to recruit new users and harvest.

These pyramid schemes form a “circle,” within which are a group claiming to have long-term experience in cashing out before multiple collapses, led by “leaders.” The consensus within the circle is that each project has a lifecycle. To make money, they keep looking for new projects and mastering entry and exit timing. Leaders actively post on various social platforms about “new cars,” “new oak,” or “rescuing xx platform (already collapsed) refugees” to raise funds for the next pyramid project. Some first-time victims, believing they can make money and recover losses, are brainwashed by leaders into trusting that they will be guided to success.

Huang Jinliang, a lawyer at Yingke (Shenzhen) Law Firm in Beijing, stated that for professional “players,” any introduction of investment activities constitutes “recruitment,” which should be legally considered as joint criminal conduct. Some think that investing early and leaving quickly means they won’t be exploited, but they may encounter “short-lived schemes” designed specifically for “smart” investors, which collapse within half a month. As for honest people brought in, legally, investors in pyramid schemes are considered “fundraising participants,” not “victims.”

Huang Jinliang observed that illegal fundraising activities like pyramid schemes have been increasingly infiltrating counties and rural areas in recent years. Compared to developed regions, rural populations are more deeply deceived and suffer larger losses, mainly due to information asymmetry, social trust biases, and lack of traditional financial channels. Rural bank financial products yield less than 4%, while platforms offering daily yields of 1% (annualized 365%) create a stark contrast. Even with legal risks, the public is willing to “cover risks with high returns.” Huang Jinliang reminds that when encountering high-return financial products, one should assess whether the return rate exceeds market norms and verify whether the involved institutions have legitimate qualifications.