Qubu, a cryptocurrency fitness app originating from China, has found itself in hot water after regulators raised allegations into its finances.
According to a report from the Nikkei Asia review earlier today, an investigation into the app has been opened by the market regulator for Changsha, the capital of Hunan province. The fitness app functions with candles, a cryptocurrency issued as rewards to users who attain certain milestones on their journey to fitness. A user who clocks 4,000 steps for 45 consecutive days will be able to earn 15 candles, and has the opportunity to trade these candles for cash or other rewards on the app.
Faking its Blockchain Connections
However, local authorities have pointed out that the fitness app had engaged in financial fraud and illegal fundraising practices. The candles were reportedly marketed as an investment instrument, with a return of up to 36.8 percent over 60 days. Per the report, the app already has about 95 million registered users in China, all of whom are charged 1 yuan ($0.14) in sign up fees.
The app also reportedly had a facility where users could exchange their candles with other users for cash. A user who spoke with the news medium explained that he had spent 15,000 Yuan ($2,150) on the app as an investment, since he believed that there was a chance of making sizable returns by investing in blockchain-based assets.
However, a lot of these were false. The news source reports that while Qubu claimed to be operating on a blockchain platform, the company actually had little to do with the technology.
A Side Effect of China’s Pro-Blockchain Stance?
There has been much talk concerning the ability of companies to grow their clientele and increase their reach by simply associating with blockchain technology. Back in 2017, Bloomberg reported that On-line PLC, a British information investment and Internet firm, was able to boost its stock price by merely announcing that it had changed its name to On-line Blockchain Plc.
The name change- despite the fact that the company didn’t have much to do with blockchain- caused the company to see a staggering 394 percent surge in its stock price, marking the largest single-day gain in the company.
Chinese companies have also been feeling the blockchain frenzy. President Xi Jinping endorsed the technology back in October, and this greenlight opened the floodgates for companies to associate with it as they pleased. Blockchain patents flooded the country, with private and public companies hoping to get a piece of it.
However, it might also have had a detrimental effect. Last month, a state-controlled news medium Focus Report ran a complete segment on the prevalence of fraud in the country’s crypto and blockchain space. Titled “Blockchain is not an ATM Machine,” the segment revealed that there are currently about 32,000 alleged blockchain companies in the country, even though less than 10 percent of them have integrated the technology into their operations.