Chinese ‘Aunties’: A Perfect Target For Crypto Scams

中国大妈 (Zhōngguó dàmā), literally “Chinese Aunties” refers to a group of middle-aged Chinese women eager to invest. The term “dama” was created back in 2013 by The Wall Street Journal, to describe the big number of Chinese aunties rushing into purchasing gold as an investment in 2013 when gold prices plunged.

The “Chinese aunt” is a magical force, and their purchasing power for gold has led to the international gold price hitting the biggest one-day gain in 2013. It is estimated that they purchased a total of 300 tons gold in about 10 days.

They were also heavily investing in China’s stocks during the market rally throughout 2014 and 2015. This bull run abruptly ended in the middle of 2015 and lost over 30% in the following weeks. Eager for new opportunities, it’s no surprise these middle-aged women started looking into bitcoin and other cryptocurrencies.

The purchasing power of these aunties cannot be underestimated. According Yang Yang, a miner who started in 2011, the dama visit blockchain conferences around the country in big numbers, “The aunts stood in front of the signing wall and posters in the venue and put together a variety of very exciting poses to take pictures. The scene was a big show, and people couldn’t help but to stop and watch. They definitely made the event even more crazy”.

However, the blockchain industry is also known because of its many scams and the less technical aunties eagerly looking for quick profits are a vulnerable target. Some aunties realize they are taking big risks for quick gains without knowing what they are investing in. Chinese netizens said, “When Chinese aunties earn money they don’t know how they made it, but when they lose money they will definitely protect their rights”

“Chinese aunt” suffered heavy losses

Recently, dama’s made the headlines again. This time because they were victim of a mining scam. One of the groups suffered heavy losses of about 2 billion RMB (USD300 million).

They don’t know about mining cryptocurrencies, and many of them don’t even know how to mine. But they have become enthusiastic about blockchain. In their eyes, mining is a new and profitable direction in the blockchain sector.

Many of these middle-aged and elderly don’t even use smartphones or other new technologies and devices. So how do they end up as a miner? The daughter of Aunt Cao (one of the victims) said that most of the aunties were introduced to the project through neighbours and friends. It basically starts with one auntie that believes in the project and she mobilizes all her other auntie friends to also get in.

After a while they learned that the purchased “mining machine” was in essence just a piece of worthless scrap iron. The auntie couldn’t bear the pressure and spent several days sick in bed and the family was about to be ripped apart.

According the daughter, they are not the only victim, as she knows at least 20 to 30 other aunties that put a big chunk of their wealth into the mining rig scam, equalling about 10 million RMB (USD1,5 million).

The reason why the impact of these losses on the family is so big, is because these aunties often control the wealth of the family. According to the 2017 China Women Wealth Management Report, 63% of households in China are governed by women, and 80.6% of the total household consumption in the country is determined by women.

On the other hand, their education level is not high and they are rather naïve and superstitious. According to the latest national census data of the National Bureau of Statistics, in 2010, less than 3% of the women between the ages of 50 and 69 were highly educated.

2 billion RMB mining machine scam

On October 29, 2018, after a lot of hassle, aunt Cao was finally “lucky” to attend a blockchain meeting in the Sheraton Hotel in Zhengzhou. At the conference, the “promising” CAI coins attracted the attention of their group, and the accompanying minging machine was also launched.

An important highlight of this machine, which was jointly developed by a company called Zhongyuan Silicon Valley and Beijing IPFS Lab, is the ability to dig two virtual currencies simultaneously. Aunt Cao said: “The mining company said that users can dig CAI before the IPFS token Filecoin goes online. After Filecoin goes online, users can dynamically switch according to the principle of maximizing revenue, forming CAI and Filecoin double digging.”

“Initial investment back after two months back, zero risk, make money while doing nothing”, were the people from Zhongyuan Silicon Valley telling the audience. Aunt Cao got very excited and started dreaming about luxury cars, she could simply not miss this opportunity.

However, all the dreams about getting rich fell apart on Valentine’s Day 2019. Rather than receiving a romantic gift, aunt Cao received two announcements from the AT exchange where her tokens were traded.  

AT exchange said that due to the platform being hacked, it has to suspend all services for a period of at least 3 months, including trading and withdrawals. In addition, the company announced that on February 7th the company’s senior executives participated in a roadshow in Silicon Valley and as a result all the mining machines will be taken over by the new project based in Silicon Valley. So rather than mining CAI, the servers will be used for the new project worth ‘tens of billions of dollars’.

The two announcements released a strong signal: AT exchange was the only exchange where CAI coin was traded. Suspension of transactions means that none of the coins can be traded anymore, nor can users withdraw their tokens. The Silicon Valley announcement means that the company’s senior management team successfully escaped China and arrived in the United States.

“This means a crash,” one investor said. Like most investors, aunt Cao’s dream ended, but it is difficult to accept this reality. What is left is just a feeling of resentment and regret. Aunt Cao is just one of the many aunties that felt for this scam, as the total damage of this mining scam is believed to be around 2 billion RMB.

“Chinese aunties” often target of scammers

Not only in the mining business, but also within the wider range of the blockchain boom China has seen several scams in recent years. Virtual currency pyramid schemes have long been eyeing Chinese aunties, as they are the most common and vulnerable victims.

  • In 2015, Zhou Yunhuang setup a multi-level pyramid scheme called ‘Baichuan Coin’ in less than a year. It is believed that this scam covered over 24 provinces and cities, more than 900.000 people and 2.1 billion RMB.
  • In November 2016, the Guangdong police cracked down on the illegal distribution of “Star Money”. In 4 months, it involved more than 160,000 people from 31 provinces and nearly 200 million RMB.
  • In September 2017, the police in Haikou cracked down on the “Asia-European Currency” pyramid scheme. In just one year, the Asia-European currency scam attracted more than 40,000 participants and absorbed more than 4 billion RMB.
  • On February 9, 2018, the Jinjiang Municipal People’s Court sent the leader of Jinjiang Woer wealth management’s pyramid scheme to jail. The defendant Wang Liangmei was sentenced to 13 years in prison for leading this organization. The organization was established in March 2015 under the banner of “Internet Finance”. It had members in 31 provinces across China, and in other countries such as the Philippines and Singapore. It attracted 350,000 registered users and the fraud involved over 5 billion RMB.

Industry veterans believe that “blockchain fraud” is often easy to succeed and focuses particularly on three vulnerabilities of the Chinese aunties to manipulate them: quick and high profits, building trust through events in high-end hotels and famous media platforms and the fact that some aunties know it involved a scam but their speculative nature makes them join the scam and trying to get out before the crash, which works for some of them.

Looking at the above, China’s ICO ban in 2017, its strict stand against cryptocurrencies and continuous warnings for illegal fundraising through coin offerings doesn’t come as a surprise.

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