The Chinese government has allegedly begun liquidating a significant portion of Ethereum (ETH) seized from the infamous PlusToken pyramid scheme, contributing to the recent declines in the cryptocurrency market.
In early August, on-chain movement of ETH linked to the case resurfaced for the first time since 2021, with around 7,000 ETH of the remaining 542,000 ETH (worth $1.3 billion) sent to exchanges in the past 24 hours, signaling the start of the asset sell-off.
For context, PlusToken was a multi-billion dollar cryptocurrency pyramid scheme that began in early 2018 and operated until June 2019, when Chinese authorities arrested its masterminds. The scam generated a large inflow of money from investors, and at its peak, PlusToken’s Bitcoin (BTC) holdings were increasing by over 10,000 BTC weekly and were worth around $85 million at the time.
By the time the system was shut down, it had accumulated around 194,000 BTC (worth $2 billion at the time) and 830,000 ETH (worth $215 million at the time). In 2020, a court document revealed that the seized assets were handed over to Beijing Zhifan Technology Co for liquidation, with the proceeds intended to be used to repay the victims.
The majority of the confiscated Bitcoin was sold between August 2019 and March 2020, with an estimated $1.3 billion worth of BTC sold during that period. Considering that Bitcoin’s market cap at the time was around $160 billion, this selling pressure is equivalent to around $10 billion today.
Unlike Bitcoin, the vast majority of the seized Ethereum remained untouched until mid-2021. About a third of the 840,000 ETH was transferred to a little-known exchange called Bidesk, where it was presumed to have been sold. Now, with the Chinese government allegedly restarting the sale of the remaining ETH, the market may be bracing for more selling pressure that could impact prices in the short term.
*This is not investment advice.