Eight people have been taken into custody in the Japanese capital city of Tokyo following accusations that they were involved in a cryptocurrency pyramid scheme.
News reports which broke in Japan on Wednesday indicate that the alleged pyramid scheme collected both cash and cryptocurrencies with a total value of $68.4 million US dollars, a value equal to nearly £53 million British pounds.
The men stand accused of contravening the country’s Financial Instruments and Exchange Law. It is believed that they failed to tell the relevant authorities in the country about what they were doing, leading to an investigation by Tokyo’s Metropolitan Police Department.
Six of the eight are believed to have admitted to the accusations, although two of the eight still deny them.
According to media reports, the men claimed that they ran a US-based investment company by the name of “Sener”.
The group is believed to have held seminars involving speakers from around the world. During these meetings, the men are alleged to have told people that the return on their investment would be somewhere between 3% and 20%.
In order to build their scheme out and attract as many potential investors as possible, the group allegedly asked those they spoke with to recruit others to the scheme as a way to get extra returns.
At first, the plot worked – with around 6,000 people from across various locations in Japan investing cash.
However, it all began to unravel when a group of around 70 alleged victims came forward and lodged a lawsuit at the Tokyo District Court.
According to the Asahi Shimbun newspaper, these people are claiming around $3.2 million US dollars in damages.
The victims are believed to be aged between 40 and 72.
One of the arrested men has been named as Kazunari Shibata, 46, who was described by the paper as a company executive in the Minato Ward in Tokyo.
Japan is a global hotbed for cryptocurrencies. According to some theories, Bitcoin itself was invented in Japan by an unknown person using the Japanese name Satoshi Nakamoto.
Many other cryptocurrencies have associations with Japan, and the country sits at the intersection of a highly tech-oriented population and a culture which values innovation.
More recently, the Japanese government took steps to recognise cryptocurrencies in a series of laws.
The country’s Virtual Currency Act, for example, makes it clear what a virtual currency is, and while some have claimed that this Act also designated Bitcoin as legal tender, this did not actually occur.
Instead, the Act only emphasised that Bitcoin can be used as a payment method.
The Japanese government has also demonstrated a willingness to regulate Bitcoin, although as the story of this alleged scam has shown, this may well have not gone far enough.
The Japanese Financial Services Authority is the body responsible for the regulation and licensing of cryptocurrency. Rather than stifle the crypto market in Japan, however, this regulation is believed to have actually boosted the market’s performance thanks to the clarification it offered.