From getting to know the personnel of the companies under Tom Cat in 2021, to investing half of his fortune in it by the end of the year, to looking forward to a surge in 2022, and then to the current situation where the whole project is ‘cold as tea’, Xiao Li (pseudonym), who has been struggling in the cryptocurrency circle for nearly a decade, never thought that he would also ‘fall from a high horse’, step on a landmine of a blockchain game project that claims to be backed by a listed company, and suffer losses exceeding one million yuan.

　　This blockchain game is named Miracle Universe (Miracle Universe). According to Xiao Li and the former employees of the game party interviewed by Beijing Business Journal reporter, the virtual currency involved is MU, which is led by Hangzhou Zhexin Information Technology Co., Ltd. (hereinafter referred to as ‘Zhexin Technology’), a wholly-owned subsidiary of Zhejiang Jinkong Tom Cat Cultural Industry Co., Ltdsports betting victory and What is it. (hereinafter referred to as ‘Tom Cat’), and mainly operated by Hangzhou Xingbu Intelligent Technology Co., Ltd. (hereinafter referred to as ‘Xingbu Intelligent’).

　　However, this statement was denied by Tom Cat. The latter said during the interview with Beijing Business Journal reporter, “After verification, no subsidiary of our company, including Zhexin Technology, has participated in the Miracle Universe game project in any way, nor do we have a clear understanding of the project. If any third party uses the name of our company and its subsidiaries without authorization to promote and publicize the above game project, the company will take necessary legal measures to protect the interests of the company and all shareholders.

　　On one hand, there are multiple accusations from investors and operators, and on the other hand, the listed company has made multiple denials after receiving the interview letter. However, Beijing Business Journal reporter noticed that the exposure about ‘JK OUTFIT7-NFT LTD’ that the game official website had hung up after the interview was quietly deleted. And OUTFIT7 is the overseas distribution platform invested by the official website of Tom Cat Company, as announced by the listed company.

　　According to relevant informed persons, the project has raised more than 10 million yuan in total, mainly from overseas institutional investors, and not a few from domestic individual investors. With more than 10 million yuan of investment lost, what risks are there in this blockchain game fundraising model? And what is the relationship with the listed company Tomcat? On May 14th, the reporter of Beijing Business Daily tried to uncover the mist behind it by combining interviews, company responses, informed persons, and expert interpretations over the past few days.

　　Hot hand chain game project

　　The saying ‘one thought to heaven, another to hell’ is not strange to people in the cryptocurrency circle, especially to old hands like Xiao Li, who felt it particularly deeply.

　　）“Recommended by a friend

　　According to company personnel involved in the project, the project was mainly launched around September 2021. At that time, data center mining was quite popular, and the company originally planned to invest in mining machines in Gansu, but after facing policy risks in mining, it shifted to consider combining game development and chain game projects.

　　“By the end of November 2021, investors had started to enter the project. By the end of April 2022, there had been a steady flow of incoming funds. The project has raised over 10 million RMB through private placements in virtual currency.” The aforementioned person said that as a staff member, he himself also participated in the investment, hoping to reap the first wave of dividends, expecting the token to increase by 5 to 10 times, but did not expect that it would remain lukewarm in the end. Although MU was listed on the Huobi exchange in April 2022, due to chaotic management, it was finally delisted by Huobi Exchange (rebranded to ‘Huobi’ in November 2022) in March this year for the reason that “the average daily trading volume of all trading pairs for thirty consecutive days was below 50,000 US dollars or equivalent tokens.”

　　”Being delisted by the exchange is basically a dead end,” said domestic investors interviewed by Beijing Business Daily reporters, including Xiao Li, as well as people from Beijing, Hangzhou, Wuhan, and other places. For example, an investor from the Beijing area told the reporter that he also came into contact with this project at the end of 2021, simply understood the background and white paper of the project, and decided to invest. “At that time, it was said that the project was developed and created by the subsidiary of listed company Tomcat, and the project was mainly to do the release platform for blockchain games. I was quite interested, and they also introduced some project plans during the fund-raising period, including the plan for new game releases, token issuance plan, and some plans for tokens to be listed on exchanges. At that time, blockchain games were a hot topic, and with the background of a listed company, the overall feeling was quite reliable, so I invested $5000.”

　　”Now we have basically lost all our money because the $5000 we invested, at the exchange rate at that time, was for one MU to be 0.015 dollars, and now its price is 0.0012, which is a drop of 92%, and only 35% has been released during this period, and it has also been delisted by the exchange, so for investors, it is almost 100% loss.” The aforementioned investor from Beijing said.

　　MU price trend chart as of March 29, 2022

　　The reporter of Beijing Business Daily can no longer search for this currency on the Huobi exchange. Moreover, from the Chinese section of the overseas chat community Discord of this game, the reporter noticed that the game indeed attracts many domestic users to participate in trading. From the discussions such as “Get ready to launch, why not be heroic?”, to “It has fallen 100 times, runaway dog”, to “It’s been a month and I haven’t received my U yet, you don’t even have a face”, it is not difficult to see the ups and downs of the hearts of these participants.

　　Regarding this blockchain game project, on May 14th, lawyer Li Ya from Beijing Zhongwen Law Firm analyzed to the reporter of Beijing Business Daily that the project claims to rely on a listed company, obtaining investors’ trust through the well-known reputation of the listed company, thereby being able to widely attract investors from both China and abroad, and absorbing more capital investment for the game. In his view, the game company combines the popularity of the metaverse and NFTs to explore new business models, which is an innovative business approach for the development company, a try to adapt to the economic development trend of the game market, and it is beneficial to attract more capital investment. However, if the company does not pay attention to the provisions of relevant laws and regulations, it will also bear corresponding legal liabilities.

　　The relationship between Tom Cat and the situation is mysterious.

　　From the stories of various investors and staff members, it can be seen that when they participated in the investment of the Miracle Universe project, one of the reasons was that the project was promoted as a product under Tom Cat during the fundraising, and from many aspects, the relationship between the project and Tom Cat’s company is not shallow.

　　Among the information used to support the evidence, one is that the CEO and one of the main responsible persons of the game, Ximen Meng, once served as a consultant and senior management personnel in a company under Tom Cat; the second is that another main initiating person, Wang Jian, was also in a key position in a subsidiary under Tom Cat at that time; the third is that the legal representative and actual controller of the operating entity of the game, Xingbu Intelligent Technology Co., Ltd., Wang Hengxin, is a direct relative of Wang Jian.

　　In response to this issue, recently, Beijing Business Daily reporters sent interview letters to Tom Cat, Zhexin Technology, and Xingbu Intelligent for verification. Among them, Xingbu Intelligent did not publicly disclose its contact information, and Zhexin Technology had not given a reply by the time of the article.

　　Tom Cat responded to the reporter from Beijing Business Daily, stating, ‘Our company and its subsidiaries have never participated in the blockchain game Miracle Universe project in any form, nor have we authorized anyone to use the name of our company and its subsidiaries to promote or publicize the aforementioned project. We do not have any specific information about the operation of the project, and we are completely unaware of its initiation and operation.

　　Tom Cat also stated that Ximen Meng is currently not a part-time consultant under the company and has never served as a senior management official of a listed company. Before February 2022, Ximen Meng only engaged in the introduction of overseas high-quality games and IPs in the company’s subsidiaries. He left the company in February 2022; in addition, since February 2021, Wang Jian has no longer served as a director of the listed company. The company has never participated in the investment and operation of Xingbu Intelligent, nor has it had any business cooperation with the company on the blockchain game Miracle Universe project.

　　Although denying it, what is peculiar is that shortly after replying to the interview, a reporter from Beijing Business Daily noticed that the cooperative party ‘JK OUTFIT7-NFT LTD’ on the official website of the game project had been quietly deleted. And OUTFIT7 is exactly the overseas investment platform published on the official website of Tom Cat.

　　In addition, although Tom Cat claimed that Wang Jian no longer served as a director of the listed company since February 2021, a reporter from Beijing Business Daily found, through the National Enterprise Credit Information Publicity System, that Wang Jian was still the financial director of the company in the senior management personnel filing disclosed by Tom Cat on June 9, 2022. Moreover, as of now, Wang Jian remains the legal representative and chairman of Tom Cat’s subsidiary Zhexin Technology, and also holds the position of supervisor in Xingbu Intelligent Company.

　　According to the game staff, ‘I was recommended to join by a cooperative partner of Zhexin Technology, but the contract and salary were signed through the newly established Xing Bu Zhineng, and the office address is on the 9th and 10th floors of Building 3, Xixi Yintai Business Center, 88 Shuanglong Street, Xihu District, Hangzhou. The office address is the same as that of Zhexin Technology and Tom Cat. The previous office location also had the LOGO of Xing Bu Zhineng and Zhexin Technology.’

　　Xing Bu Zhineng was established at the end of June 2021. Some investors speculated, ‘This game project is operated by a newly established company and has no direct connection with the equity structure of Zhexin Technology and Tom Cat, but the office address and relevant responsible persons have close contact, or it may also be done to avoid legal and regulatory structure cutting. They staff said that this was actually Tom Cat’s own project from the beginning, and the office locations are all the same.’

　　”Not disclosing it publicly is also because the market for online casinos and how to find them in China is strictly regulated by law, and public disclosure is likely to touch the legal red line, in order to reduce the legal risks of this game model.

　　Pan Helin, the joint director and researcher of the Zhejiang University International Joint Business School Digital Economy and Financial Innovation Research Center, stated, ‘The legality of play-to-earn games in China has always been controversial. It is clear to the industry that China has a strict version number approval system for the gaming industry. One needs to check whether the game has passed the review of relevant departments and whether it is legal and compliant. If it is not legal and compliant, then this is a violation of the law, which requires follow-up investigation by regulatory authorities and the announcement of the correlation between play-to-earn games and the company Tom Cat, all of which are legal issues that outsiders are hard to make objective judgments about.’

　　Being accused of stepping over the virtual ICO red line.

　　The parties involved in the Miracle Universe case either distance themselves from the relationship or avoid talking about it, mainly because the fundraising behavior of the game project through virtual tokens MU has already been suspected of being illegal in China.

　　The People’s Bank of China, the Central Cyberspace Administration, the Supreme People’s Court, and other 10 ministries have already明确规定 that online casino and How to find it related business activities are illegal financial activities. The new ‘Interpretation of Illegal Fundraising’ also clearly stipulates that illegal fundraising through virtual currency transactions and other means shall be punished for the crime of illegal public deposit.

　　Tom Cat responded to Beijing Business Daily reporter, ‘Our company firmly supports and strictly abides by the national laws and regulations and the relevant provisions of the People’s Bank of China, the Central Cyberspace Administration, the Supreme People’s Court, and other 10 ministries and commissionsonline casino help and The latest method. Our company has not launched a blockchain game project, nor does it exist to raise funds through virtual tokens MU. Regarding the situation where third parties, without authorization and without our company’s knowledge, have used our company’s and its subsidiaries’ names to promote related projects, our company is further investigating and will take necessary legal actions based on the results. ‘Regarding whether the subsidiaries are involved in mining business, Tom Cat also said, ‘Hangzhou Zhexin Information Technology Co., Ltd. did not have the aforementioned related business before and after 2021.’

　　From the perspective of Miracle Universe’s business model, the industry believes that this action may have involved the initial game offering (IGO) behavior for the first time. It is learned that IGO is a crowdfunding form of blockchain technology that is a variant of ICO, mainly established for the electronic gaming market. IGO is the latest fundraising model for tokens related to NFT game projects, which can be used to purchase characters, skins, weapons, potions, and other products in the game.

　　Li Ya openly stated that the blockchain game project, which raises funds by investing in virtual tokens before the game is released, and the game company listing virtual tokens on decentralized exchanges, where investors obtain returns by increasing the value of virtual tokens, has a high risk. This method of fundraising through virtual tokens both domestically and internationally requires investors to bear high financial risks and is prone to being ‘cut off’. Investors may face risks such as the devaluation of virtual tokens and the failure to release the game, ultimately ending up with nothing. For the game issuer, fundraising through virtual tokens may also cross the legal red line.

　　In fact, since February 23, 2022, the Supreme People’s Court issued the ‘Decision on Amending the ‘Interpretation of the Supreme People’s Court on the Specific Application of Law in Handling Criminal Cases of Illegal Fundraising’, which stipulates that illegal fundraising through virtual currency transactions and other means shall be punished for the crime of illegal public deposit. This regulation has already indicated that there is no legal space for virtual tokens in China, and the issuers may also be involved in criminal offenses. Li Ya said.

　　Pan Helin also said, “Currently, there are compliance issues with chain games in China. If it is a game, there is the issue of version number approval, which needs to be regulated. If it involves tokens, and since our country has not opened up tokens, it may involve issues such as illegal fund-raising and financial fraud. Perhaps in the future, our country will consider relaxing the system, but at present, with the system not yet relaxed, the possibility of illegal operation is very high.”

　　In this controversial blockchain game project, as the industry speculated: “Almost no one makes money, everyone has been exploited…”

　　Li Ya further stated that although many consumers have rich experience in market transactions of Online casino and How to find it, it should be recognized that participants in the Online casino and How to find it market are more likely to face potential losses brought by market risks, credit risks, and policy risks. Investors should establish correct investment concepts, not to believe in the so-called Online casino and How to find it wealth-creation myths, to invest with risks, maintain rationality, establish correct legal awareness, and avoid falling into the trap of financial risks.

　　”The virtual token MU project involves fund-raising, similar to ICO financing, and is listed on exchanges overseas. ICO is an illegal fund-raising activity within the territory, and individuals participating in transactions overseas are not protected by domestic laws. Chinese regulatory authorities have also repeatedly warned about the risks involved.” Yu Bacheng also said. For individuals in China, buying and selling Online casino and How to find it involves multiple risks: first, the risk of loss due to price fluctuations and leverage trading; second, the risk of unknown risks arising from overseas regulation, exchanges, technology, and currency exchange; third, the risk of not being protected by law when disputes arise due to the domestic ban on Online casino and How to find it trading; fourth, the risk of being defrauded. For the general public, Online casino and How to find it involves risks in asset rights identification, product nature, transaction methods, currency exchange, and legal protection. It is necessary to have a clear understanding of this and not to participate in it is recommended.

　　”The current domestic rules are clear, and the existence of chain games is not allowed. Various regulatory authorities should also take the initiative to crack down on these illegal applications and enterprises. Such rectification can also produce risk warnings for investors to a certain extent, avoiding more people falling into traps.” Pan Helin said.

　　Beijing Business Daily Financial Investigation Team