This is a piece that I thought was highly relevant and an ongoing feud between INBlockchain partner Li Xiaolai and Didi founder Chen Weixing. This is a selective curation from an article originally posted on Blockzone.com
Li Xiaolai, the “richest man in the cryptocurrency”, has left the community, leaving chaos in his wake.
A Storm of Public Speculation
In the early morning of September 30, Li Xiaolai posted a message on Weibo, stating that he “will not personally make any investments in projects (whether it is about blockchain or not),” and that he is “still optimistic about blockchain technology in the long run.”
“From now on, Li Xiaolai will not personally make any investments in projects (whether it is about blockchain or not, or whether it is an early investment or not). Therefore, if you see Li Xiaolai claimed as the investor in the future (as has previously been claimed for a long time, falsely for almost 99% of the projects), please do not pay any attention to it. I am going to take a few years to seriously change careers. As for what to do next, I have not thought it through yet. However, I am still optimistic about blockchain technology in the long run.”
This post generated a storm of public speculation. People from all walks of life guessed about Li Xiaolai’s motivation for leaving the cryptocurrency community.
- Is he like a rat escaping from a sinking ship? Does he feel the blockchain markets will continue the downward trend?
- Is regulation tightening? Is Li Xiaolai protecting himself?
- Is he wealthy enough already?
- Does he just want to do what’s right for the people?
- Does he want to slow down his pace after being part of the bustling crypto scene?
- Does he want to manipulate things behind the scenes?
Li Xiaolai did not offer any further reply.
Li Xiaolai’s opponent, Chen Weixing, asked five questions on his personal Weibo. He listed Li Xiaolai’s previous projects that have not yet been paid off and asked seriously “whether a ‘public’ figure who has collected a huge amount of money from others can exit the cryptocurrency community, taking their money with him.”
Some media workers have sharp eyes.
Someone has said that he would like to exit from the currency community. I really admire his courage.
But I have a few questions:
1. He raised funds for more than 20 token-issuance projects, and he is the actual controller of some of the projects. The funds of most of the projects are stored in his accounts. I don’t know how he will manage the funds after changing his profession.
2. INBlockchain has raised 300 million yuan, and most of the funds are claimed to have been invested in various token-issuance projects. What about the post-investment after he changes his profession?
3. For the Xiong’an Fund, 30 million yuan was provided by the government. Some of the funds are invested in the token-issuance projects supported by Li Xiaolai. Although he is no longer a partner, they are still the main shareholders. I do not know what will be done for the post-investment management.
4. With Alipay, he established “Fengli Funds” by collecting funds from supporters and illegally raised more than 400 million yuan at an interest rate of 8%. Most of the money was also invested in blockchain, so how will withdrawal of these funds be handled in the future?
5. Before the blockchain token was issued, he had conducted an equity crowdfunding of nearly 100 million yuan through companies such as Make Xinsheng, and all these funds were used for investment. I do not know how this will be explained to investors.
I would like to ask whether a “public” figure who has collected a huge amount of money from others can exit the cryptocurrency community, taking their money with him.
The hot discussion about Li Xiaolai’s sudden departure from the cryptocurrency circle confirmed an obvious fact: Li Xiaolai has a large influence in the community. The cryptocurrency community is a world of its own and includes fixed retail investors and powerful wealthy leaders. Changing professions and making profits from retail investors is second nature to Li Xiaolai; he will go wherever he wants to go. However, his wealth is not just arbitrage and capital. As many know in the cryptocurrency community, Li Xiaolai has maintained a blurred relationship with many project parties, and media outlets have identified him as a previous supporter of several pyramid-scheme platforms. As a result, Li Xiaolai’s wealth is not simply a differential of the price obtained from ordinary retail investors. Instead, it is referred to as “illicit money” by the industry.
Li Xiaolai is smart enough to take a step back and look for long-term benefits. In the cryptocurrency circle, the ability to profit is closely related to the bull-bear cycle. As the regulatory policies became more strict coinciding with the bear market, Li Xiaolai denied his behavior and published books to bolster his reputation.
Trapped in Negative News
Li Xiaolai has said that the first half of his life was difficult; his 46th year was also unlucky.
Last year he famously stated, “I earned two billion yuan while I was asleep.”
In September 2017, Li Xiaolai entered the public eye through his engagement in cryptocurrency trading. He amassed a huge wealth and was regarded as a life mentor by Bitcoin enthusiasts. He stood on the cusp of greatness and his words became the standard that cryptocurrency investors lived by.
The following summer, the “recording event” scandal was exposed. Li Xiaolai once again stood on the cusp, but this time it was the cusp of infamy. In the recording, which was centered around a messy cryptocurrency platform and chaotic funding, Li Xiaolai claimed that the projects of Shuai Chu (founder of Qtum), Sun Yuchen (founder of TRON), and Da Hongfei (founder of NEO) were empty projects.
Li Xiaolai slammed famous figures and blockchain projects and told the audience about his own investment methods with a winner’s attitude. In a recording, which lasted 50 minutes, Li Xiaolai used profanities and insults for several of them. His famous quote now became, “a consensus of stupidity is still a consensus.”
The recording caused an uproar in the industry. At the beginning of the bear market, the blockchain industry was trapped in chaos and out of control once again. With this recording, Li Xiaolai lost his reputation as “God” of the currency community and became the public enemy of retail investors.
Li Xiaolai, trapped between greatness and infamy, did not remain idle. Since the cryptocurrency markets entered bear territory earlier this year, issues of investor protection have continued to show up. The name Li Xiaolai has appeared repeatedly, condemned by retail investors defending their rights. In BigOne’s investor protection Telegram group, community members threatened to break Li Xiaolai’s legs. In the NASH community group, some members said that Li Xiaolai changed his name for the sake of fraud, and that he would never stop his shady behavior. The project PressOne lacks a whitepaper, and it is alleged that the official website of GCT, a key Li Xiaolai project, cannot be found. Almost every project supported by Li Xiaolai is affected by investor rights and protection issues.
In just one year, Li Xiaolai went from an inspiration respected by thousands to a con artist despised by thousands more. An individual on the Chinese Q&A website Zhihu went so far as accusing Li Xiaolai of being as criminal as one of “the largest drug lords.”
The Whitewashing of Li Xiaolai
Li Xiaolai wanted to shake his bad reputation and restore his image as a good businessman. As early as last September, an article named “The Road to Wealth and Freedom of a Scammer” caused the public to accuse Li Xiaolai of deception. Li Xiaolai, who normally refuses interviews, accepted one with Caixin Network and said, “I have never endorsed any project. All projects that claim to be endorsed by me are lying.”
In April of this year, Li Xiaolai gave a speech as partner at the launch conference of the 10 billion yuan Xiong’an Global Blockchain Innovation Fund and simply explained how blockchain technology will change the world. The community interpreted this as Li Xiaolai successfully re-establishing himself as a leader in blockchain.
On May 21, CCTV Finance broadcasted a program called “Focus on the Currency Market Chaos,” highlighting that Li Xiaolai often appeared in the propaganda of empty projects. Li Xiaolai argued that he was falsely represented as a supporter of these projects in almost all cases. “Those who are eager to make money are afraid to miss opportunities. They cannot make judgements, so they depend on the support of an influential person. This adds optimism to the project.” During the interview with CCTV, Li Xiaolai denied all allegations regarding his involvement with empty and scam projects.
In July, Li Xiaolai published a new book called “Self-cultivation of Retail Investors/Chives” in which he advertised his marketing genius. The book sold out and he successfully portrayed himself as innocent, gaining new fans and a new batch of retail investors.
One netizen joked that, similar to how Li Xiaolai harvested a new batch of retail investors with his new book before leaving the community, having bought the book when it first came out also lets you experience the feeling of being cheated due to its drop in price. Currently, the price of the book has dropped even further from its initial price.
Some media outlets believe that the “Self-cultivation of Retail Investors” was a public relations effort to make Li Xiaolai seem innocent, and many were eager to buy it. In the book, there is not a single mention of the issue that concerns most people: how do we reverse the downtrend and increase the value of cryptocurrencies.
Looking back, it seems obvious that Li Xiaolai has been preparing for his escape from the cryptocurrency community for quite some time. This idea is corroborated by members of the WeChat community, as he escaped peacefully using comforting speeches.
Many Leaders Have Left the Cryptocurrency Community
After experiencing controversies such as Li Xiaolai’s exit, scams, quarrels among leaders, and all kinds of strange and devastating projects, the decentralized ecology of cryptocurrency that people once rallied behind has become a jungle that deprives retail investors of benefits, and many leaders have chosen to escape from the messy community.
On January 25, 2015, Jiang Xinyu from the Youth Class of the China University of Science and Technology, known as the “fried cat” in the cryptocurrency community, disconnected and has not been heard from since.
In January of this year, Xu Zijing, “the Martian”, announced in WeChat that “he will return to Mars to retire…goodbye, blockchain!” At the same time, he said that he would withdraw from all foreign investment and project consultant work indefinitely.
At the beginning of August, major media outlets reported that investor Zhu Pan, a youth in his 20s, was suspected of using the ZJLT (ultimate ledger) project to deprive retail investors of benefits. The victims fought to defend their rights, saying Zhu Pan is a liar and demanding that he pay back their hard-earned money. In the afternoon of August 6, Zhu Pan announced in WeChat: “I will permanently withdraw from the cryptocurrency community and will not shirk any responsibility. Sorry, I have been keeping a clear conscience the whole time!”
The originator of the cryptocurrency community and the inventor of Bitcoin, Satoshi Nakamoto, has never been publicly identified. Apart from Mr. Nakamoto, many leaders in the cryptocurrency circle have become entangled in negative news, prompting them to withdraw entirely. To account for Nakamoto’s stealth, an authoritative media source offered the following interpretation: “It has not been that long since Bitcoin came out, and the founders are still alive. Nobody has sought to claim the ‘laurel of the father of Bitcoin,’ which shows that these people who originally participated in the Bitcoin initiative were very aware of what they were doing, what economic benefits they had obtained, and the legal risks they might have to bear for what they did. Based on this, the ‘father of Bitcoin’ becomes an unclaimed and dangerous title.”
The Three Major Obligations of Li Xiaolai
Li Xiaolai’s followers, whether they profited or not, will not leave as easily as the former leaders of the cryptocurrency circle. Li Xiaolai has three main obligations to the community he left behind.
1) Promote good practice.
Li Xiaolai’s money-making routines, marketing methods, and recording incidents have had a lasting negative effect on the community. Many immature investors lost their work ethic because of the concepts and propaganda spread by “Lie Xiaolai”. This led them to speculate, and in some cases, left them in financial ruin. Li Xiaolai and his followers have an obligation to make amends by promoting good practice.
2) Stabilize the cryptocurrency community and take responsibility.
Li Xiaolai is the richest man in the cryptocurrency circle. Even though he is notorious, he also made a huge impact on the community. Therefore, Li Xiaolai has an unshakeable responsibility to the community that made him rich. The current supervision is tightening, and the cryptocurrency community is riddled with chaos; “Lie Xiaolai” can run, but he cannot hide. At the very least, he should work to guide retail investors to exit the markets with grace while offering his sincere apologies.
3) Invest in blockchain.
Li Xiaolai, who made a fortune from the cryptocurrency markets, has expressed his belief in Bitcoin. In his farewell letter, he claimed to be optimistic about the long-term prospects of blockchain. However, with his words and deeds, especially the recording incident, he has made a large negative impact on industry development. Now that he has left, who will repair the damaged reputation of the blockchain community? As a former leader, he should rise to the call to support industry development and let all of society enjoy the benefits of blockchain.
Li Xiaolai and other leaders in the cryptocurrency community all gained fame and fortune from this revolutionary technoloy. Great personal achievement came at the cost of others, and the sins of the richest man in Bitcoin cannot be erased with a few words. Li Xiaolai and other leaders owe it to the community to repair the damage they have done, no matter how much they have distanced themselves from it now.