• Chinese police arrested seven suspects for participating in a $2 million crypto graphics card counterfeit scheme.
• The group purchased used GPUs, cleaned them, removed identifying marks and sold them as new to crypto miners.
• The high demand for GPUs due to the chip shortage made it easier for the group to scam customers.
Chinese Police Bust $2 Million Crypto Graphics Card Counterfeit Scheme
Chinese police have arrested seven people in connection with a $2 million crypto graphics card counterfeit scheme. The suspects allegedly bought used GPUs from miners, cleaned them, removed identifying marks and repackaged them as brand-new models to be sold at premium prices.
Crypto Mining Drives High Demand For GPUs
Demand for graphics cards has been on the rise since 2017 when cryptocurrency prices first skyrocketed. Miners constantly need to upgrade their gear in order to remain competitive when connecting to proof-of-work networks like Bitcoin , Litecoin, Ethereum Classic, and Monero. In these networks like Ethereum Classic, miners connect their graphic cards and compete to solve complex cryptographic problems for a chance to verify a block of transactions and receive rewards in the network’s native currency that can later be traded for cash.
Chip Shortage Opens Opportunity For Counterfeiters
The current global chip shortage has made it difficult for consumers to purchase new GPU’s resulting in higher than usual prices that unknowingly allowed victims of the scam access. This high demand provided an opportunity for those involved with the counterfeit operation who took advantage of unsuspecting customers by selling used GPUs as new models at premium rates.
Seven Suspects Apprehended In China
During a year-long investigation by police in Bincheng district of Binzhou City, authorities discovered numerous mining enclosures missing their graphics cards in a warehouse leading them to apprehend seven Chinese nationals accused of producing and selling counterfeit graphics cards that look like genuine products from well-known manufacturers.
Halving Events Impact Supply Of Cryptocurrency Reward Coins
In August Litecoin will halve its miner rewards followed next year by Bitcoin and Bitcoin Cash network rewards which will impact supply levels further making it more difficult for those attempting similar fraudulent activities as well as other miners hoping to realize profits from mining cryptocurrencies