China Ex-Official Publicly Shamed Over Crypto Corruption

A former Chinese government official has apologised publicly for supporting cryptocurrency mining, apologising on television for being a “sinner” and causing “grave losses” to his city, according to local media reports.

Xiao Yi, who was removed from his post in November 2021 amidst a crackdown on cryptocurrency mining and other areas of the economy, is the most senior Chinese official to date to be punished for illicit involvement in the industry.

A former high-ranking official in China’s southeast Jiangxi province and former Communist Party chief of Fuzhou city, Xiao allegedly helped a local crypto-mining company hide its activities by masquerading as a big data and cloud computing business, according to a Sunday report on China Central Television (CCTV).

He instructed Jiumu Group Genesis Technology to “put up a performance” during visits and inspections by other government officials, amidst a crackdown on the sector that began in 2018.

Cover-up

From 2017 to 2020 Jiumu Group operated 160,000 crypto-mining machines that accounted for 10 percent of Fuzhou’s total electricity consumption, the report said.

Xiao covered up the company’s power usage by asking government departments to fabricate statistics and to change the categories to which Jiumu’s usage was assigned.

He also reportedly helped Jiumu raise 2.4 billion yuan ($354m, £293m) in government financing.

The investigation into Xiao also reportedly found that he had accepted bribes related to construction contracts and illicit promotions.

Crypto crackdown

“I’m a sinner to the people in Fuzhou, and I have failed them,” Xiao said on camera in the report. “Because of my distorted view of political achievements … I acted recklessly, causing such grave losses.”

China’s crackdown on crypto-mining intensified in May 2021 and by July 2021 mining activity in the country had dropped to zero, as miners shifted to Central Asia and North America.

But it quickly returned, with China accounting for 20 percent of Bitcoin’s total hash rate from September 2021 to January 2022, according to data from the Cambridge Centre for Alternative Finance (CCAF).

Mainland China users also made up 8 percent of the customer base of collapsed crypto exchange FTX, in spite of China’s cryptocurrency ban, according to an FTX bankruptcy filing in November.