A Chinese businesswoman who once controlled roughly 9% of global bitcoin mining power lost more than $9.4 million in a U.S.-based fraud scheme involving two men posing as Middle Eastern royalty, according to the Department of Justice. In 2026, the perpetrators were sentenced to 24 and 23 years in prison, while a city official who accepted bribes received an eight-year sentence.
Fake deal and staged ceremony exposed
Lyu Yongshuang, founder and chief executive of Chengdu Wanyou Computing Technology, moved her operations to Ohio in 2021 after China banned cryptocurrency mining. Seeking to restart her business using cheaper electricity, she entered a deal with Zubair Al Zubair and his brother, who fabricated identities and connections to gain her trust.
Court records show the scheme included a staged contract signing ceremony in East Cleveland, arranged with the help of a bribed city official. Lyu transferred $3 million to the brothers’ company and shipped 1,067 mining machines worth about $6.17 million. The equipment was later resold illegally in Canada.
Expansion and sudden disruption after China crackdown
The fraud unfolded shortly after China’s May 2021 crackdown on mining, when authorities ordered power suppliers in Sichuan to stop supporting mining farms. The region had been a global hub thanks to hydropower prices as low as 0.2 to 0.3 yuan per kilowatt-hour during flood season.
Lyu had built her company rapidly after founding it in 2019, launching mining pools 1THash and Bytepool. By 2020, they ranked among the world’s top operations, together accounting for about 9% of bitcoin’s total computing power at their peak.
Before entering digital assets, she worked in international trade and tourism. Her mining footprint eventually spanned nine data centers across China, the United States, Canada, Russia, and Sweden before regulatory pressure forced closures at home.
Legal troubles extend to China
At the same time as the U.S. case, Lyu faced legal challenges in China tied to a 19.29 million yuan contract with a listed company’s subsidiary. A court ruled in 2022 that the agreement, linked to mining activity, was invalid and ordered a full refund. The decision was upheld on appeal.
Separately, the counterparty firm’s former chairman, Li Qunnan, was investigated for misappropriating more than 53 million yuan to purchase mining equipment that audit reviews later found never became operational assets.
Market caution rises as risks come into focus
The case highlights persistent operational and cross-border risks in the digital asset sector, particularly as companies relocate to new jurisdictions under regulatory pressure. It has reinforced a broader shift toward stricter oversight and risk control.
A January 2026 survey of 351 institutional decision-makers found that 49% are increasing their focus on governance and risk management. About 66% cited regulatory compliance as a key factor when selecting partners and custodians.
Weak demand and continued outflows weigh on bitcoin
Market conditions have worsened in 2026, with bitcoin falling below $63,000 in June, down nearly 30% since the start of the year. Capital has rotated into other sectors, including technology stocks, while spot bitcoin ETFs recorded 12 consecutive days of outflows in early June.
On-chain data shows total demand has shrunk by 652,000 BTC, marking the sharpest contraction since January 2022. The Coinbase Premium has remained negative, signaling weak buying pressure from U.S. traders even as prices approach levels some analysts view as a structural floor.
Regulators tighten framework amid ongoing risks
U.S. regulators are moving to clarify oversight as risks persist. On March 17, 2026, the Securities and Exchange Commission and the Commodity Futures Trading Commission issued joint guidance on how digital assets are classified under federal law. The SEC’s draft 2026–2030 strategy also emphasizes clearer market rules and stronger enforcement against fraud.
Adoption advances despite downturn
Despite declining prices and negative sentiment, adoption trends continue to develop. Tokenization of real-world assets has grown by about 589% since early 2025, indicating sustained interest in blockchain-based financial infrastructure.
The case underscores the importance of verifying counterparties and understanding legal frameworks when operating across borders, particularly as the market navigates heightened uncertainty.
Worried about scams in crypto? Learn essential crypto safety tips to protect your assets from fraud and phishing schemes.
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