July 26, 2023
By Anjali Kochhar
Chinese authorities have successfully busted a major counterfeit operation involving graphics cards used for cryptocurrency mining. On July 20, reports revealed that several suspects were arrested in the Bincheng district of Binzhou City after a year-long investigation by the police.
The suspects, all Chinese nationals, are accused of selling used graphics cards as brand new to unsuspecting crypto miners. Their cunning modus operandi involved buying relatively new GPUs in bulk from miners, cleaning them, removing identifying marks, and repackaging them to appear as genuine products from well-known manufacturers.
The counterfeit scheme took advantage of the global chip shortage and the resulting high demand for graphics cards, which made it difficult for consumers to find new ones. As a result, many customers agreed to pay higher prices, unknowingly falling victim to the scam.
Cryptocurrency prices have experienced a remarkable surge in recent years, leading to an increased need for miners to upgrade their equipment regularly to stay competitive. Miners, particularly those connected to proof-of-work networks like Bitcoin, Litecoin, Ethereum Classic, and Monero, use graphic cards to compete and solve complex cryptographic problems to verify transactions.
In the Ethereum Classic network, for example, successful miners receive block rewards in the network’s native currency, which can later be sold for cash to cover operational expenses and realize profits.
The counterfeit scheme was particularly insidious because the scarcity of GPUs due to high demand in various industries, not just crypto mining, has created an opportunity for some unscrupulous individuals to refurbish used gear and sell it as new.
The upcoming events of Litecoin halving its miner rewards to 6.25 LTC and Bitcoin and Bitcoin Cash also reducing their network rewards next year might impact supply and potentially support prices in the future. Miners will likely need to upgrade their equipment to stay competitive, especially if prices continue to rise.
Chinese authorities are working to apprehend all those involved in the $2 million graphics card counterfeit scheme, ensuring that the crypto mining community can operate fairly and securely in the face of challenges posed by supply constraints and increased demand.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.