Crypto’s university grooming rumors echo China’s ‘naked loan’ scandal

Major cryptocurrency exchanges are under fire over allegations that they gave leveraged platform-locked funds to university students in China to encourage speculative trading. The controversy has drawn comparisons to the country’s campus lending scandal nearly a decade ago, when students burdened with debt were offered exploitative “naked loans” in exchange for nude pictures as collateral.

Major cryptocurrency exchanges are being accused of giving leveraged platform-locked funds to university students in China to encourage speculative trading, according to a report by crypto media outlet BlockBeats.

The outlet claims that the exchange Bitget was running a program to give trial funds to students for futures trading, with the profits to be kept by the students and those who post high-return screenshots on WeChat to be offered additional rewards.

ETHPanda co-founder Bruce Xu called the model a way of grooming the next generation of gambling degens. He added that the exchange was also giving out non-withdrawable funds for students to trade futures with.

Many commenters on X speculated that the exchange was Bitget due to its February campus ambassador program. However, Bitget's head of Asia Xie Jiayin (Smith Tse) said the initiative focused on Web3 education and career support, not trading.

"The program was publicly announced in February and taken offline within 16 hours due to public misunderstanding," Xie said. "We never distributed any trial funds to students."

One X user accused Bybit of visiting universities and distributing trial funds to students.

When asked for comment, Bybit CEO Ben Zhou said: "Please provide proof. I'm asking for evidence, not gossip or hearsay."

Zhou added that he was disappointed by the spread of unverified rumors in the crypto community.

"It's crucial to engage in respectful dialogue and avoid engaging in personal attacks," he said. "Let's strive to maintain a positive and supportive environment within the crypto space."

The controversy has drawn comparisons to a fintech scandal in China around a decade ago involving Qufenqi.

Founded in 2014, the company offered installment loans to students for electronics and other goods, allowing them to make monthly payments with nothing more than a student ID and physical visits to college campuses with booths and flyers to push its product.

The platform was soon mired in controversy due to hidden fees and debt traps that left students borrowing from one platform to repay another.

Local media investigations uncovered a much darker side of campus loans, as some students turned to black-market lenders to pay off their debt.

Desperate college students resorted to what’s known as naked loans, where female students were asked to provide nude photos or videos as collateral, with the threat of public exposure if they failed to repay. Some fell into irreversible debt spirals and repaid their debt with sexual favors. In the most tragic cases, some were driven to suicide.

Firms offering campus loans shut down following a regulatory crackdown in 2016 and 2017. Qufenqi ditched its campus lending model and rebranded as Qudain and listed on the Nasdaq. But its negative image has damaged its reputation and its stocks are down more than 90% from their peak.