Gray cash spread! Small ads stare on shared bikes

When riding a bicycle in a city, have you ever noticed small advertisements popping up everywhere? Do these ads leave any impression on you?  Not long ago, the country's first case involving illegal cashing out using "Hua Hua" ended with a jail sentence. The suspect, Du Mou, managed to withdraw 4.7 million yuan in just four days. The crime threshold was low, and the amount was staggering. The conversion of virtual credits into real money under the guise of "Internet" and "new finance" has brought new challenges for regulators. On one hand, violations are becoming more subtle, and on the other, risks are interconnected. It remains to be seen whether relevant parties can work together with platform operators to address this issue effectively. When "funds hackers" target shared bikes "What’s so scary? I process more than a dozen orders a day," said a local advertiser at Shenzhen Bookstore Square. Using the identity of a "cash player," the reporter observed how small ads on shared bikes were being used to promote cash-out services. One advertiser claimed to offer fast cash without collateral. According to transaction records, they had already processed three orders that morning, with amounts ranging from 200 to 400 yuan. Scorpio is an internet financial consumer credit product launched by Ant Financial. Users can receive credit between 500 and 50,000 yuan, with an interest-free period, but they must use it through specific scenarios or shops. Similarly, Jingdong's I-bar product can only be used within the Jingdong Mall. In the gray cash-out chain, flower buds and white bars have been exploited as arbitrage tools. How does one achieve "instant cash"? For reporters posing as cash investors, an advertiser named Li demonstrated different options and fee rates for flowers, white bars, and even credit cards. The first method involves flower buds. After setting a quota, Li quickly generated an Alipay QR code on his phone. Once scanned, the system displayed a product worth over 7,100 yuan, which the user could pay for immediately. After paying, Li would deduct 6,390 yuan (after a 10% commission) and transfer the remaining amount to the user. The entire process took less than a minute, and the user didn't need to check the purchased item. In another scenario, the user had to inspect the goods. Li explained, "This is safer, but the cost is higher—15% fee." The user would purchase a designated product on Tmall or Jingdong, complete the payment using flowers or white bars, collect the goods, and then Li would return them at the "receipt price" to get the cash. The user would then pay the transaction fee based on the product's price. Li stated, "We don’t create money. We’re just intermediaries." However, these individuals have become brokers for various forms of illegal loan assistance. According to lawyer Luo Yang from Dacheng Law Firm, "Although the transaction appears to involve active consumption and price transfer, when analyzed closely, the combination of two steps constitutes illegal cash withdrawal." This type of gray cash flow has long been under government control, yet it continues to persist. By leveraging new platforms like shared bicycles, the gray market has reached a broader audience, creating new regulatory challenges. According to OFO data, Shenzhen has 250,000 bikes, with 3 million rides per day. In areas like tech parks and shopping districts, the user base overlaps significantly with those seeking credit. Although both Moipai and OFO have explicitly banned such ads, removing them is as difficult as clearing wall "psoriasis" ads. Li said, "In Shenzhen, where there are bikes, there are flower buds and white bars." At a crowded parking spot, out of 20 bikes, 8 had small ads, and 6 of the numbers led to cash-out services with fees between 8% and 15%. Underground gray cash chains Calculating the transaction fee at 8% to 15%, the annualized interest rate for users engaging in such transactions reaches 104.35% to 211.76%. In contrast, regulated short-term loans from major platforms like Ant Financial and Tencent Micro-loan are capped at 36% annually. Some smaller platforms still charge around 130% to 150%. Despite this high cost, people still take the risk. Li’s records showed that in the past two days, he processed 15–20 orders. Most were between 200 to 500 yuan, often through purchases of electronics or online games. Daily cash flows ranged from 3,000 to 46,000 yuan. Luo Yang noted that the small, high-frequency nature of these transactions helps evade platform monitoring and shows that the customer base overlaps well with previous small loan platforms. Li, who previously worked for a cash loan platform, started posting ads on social media in early 2016. His company, Shenzhen Reel Credit Network Financial Services Co., Ltd., claims to offer quick loans with no credit checks. However, the company’s website is no longer accessible. Some companies can easily obtain merchant QR codes and use them for multiple transactions, funneling funds into P2P sites or loan platforms. This creates a complex underground chain involving many players. Regulatory technology “can’t stop” These operations aren’t limited to local areas. During the investigation, two "capital brokers" expanded their business across the Pearl River Delta, even reaching Jiangsu and Zhejiang through friends. Because the cost of cash-out is low, multi-platform and highly concealed methods have also emerged. On second-hand trading platforms, small teams of 2–3 people are actively involved. Throughout the entire cash-out process, the transaction chain formed between consumers, financial providers, and e-commerce platforms becomes distorted due to the involvement of "money brokers." Driven by profit, these actors often operate in a complex network, despite legal warnings. In December 2017, the first criminal case involving illegal cash-out using "Hua Hua" was sentenced. Du Mou colluded with over 2,500 e-commerce users across the country, cashing out 470 million yuan from "Hua Hua" and earning over 400,000 yuan in fees. He was sentenced to two years and six months in prison and fined 30,000 yuan. Regarding prevention, Ant Financial and JD.com mentioned their risk control systems. Ant Financial uses smart risk control, anti-fraud engines, and joint defense mechanisms. JD.com monitors suspicious activity in real time and freezes accounts if violations are found. However, Zhang Yexia, a senior researcher at Net Loan House, argues that these issues are hard to resolve with technology alone. "New financial speculation methods often outpace regulation," she said. E-commerce platforms' ease of audit and low barriers make them vulnerable to exploitation. Alienated mutual gold risk Flower buds and white bars, like credit cards, allow arbitrage due to their interest-free design. While credit card cash-out is heavily monitored, it still persists because of its arbitrage potential. A senior banking expert noted, "Whoever cracks down on cash-out will see a drop in usage." According to the China Financial Supervision Report (2017), financial technology has entered a 2.0 phase, characterized by cross-border, decentralization, and disintermediation. These changes challenge traditional supervision models and consumer protection efforts. Even in the era of conventional POS machines, distinguishing real trade from cash-out was difficult. In the Internet age, with low thresholds and complex links, and the anonymity of transactions, the number of supervised entities increases, making regulation harder. It's not just virtual credit cards facing these issues. Internet financial fraud spans all sectors. Under the "Internet+" cover, numerous Ponzi schemes exist. As of July 2017, over 10,000 Internet finance platforms operated in China, with nearly 530 million active users. Risk management remains a long-term challenge. Helping others cash out may be illegal, and users face hidden risks. Some users were scammed after providing account details to intermediaries. They were later kicked out of groups or blacklisted. After cashing out, users still owe money. When dealing with "money brokers," personal information may be stolen, leading to further fraud. Thinking: How to Balance Innovation and Risk Balancing innovation and risk has always been a core issue for regulators. Without clear rules, explosive growth in the past three years leaves mutual gold platforms constantly under threat. For example, the P2P model grew rapidly since 2013, leading to widespread issues like illegal fundraising. Regulatory actions have become more proactive in recent years. With stricter regulations, the industry will see a reshuffle. Non-compliant platforms will be removed, while quality platforms will provide safer services. Although products like flower buds and white bars are based on real trade, their background is hard to verify. Internet finance’s features—such as anonymity and cross-regional operations—make regulation challenging. The complexity of Internet-based financial risks has long been a regulatory challenge. Passive supervision isn’t enough; new approaches like "subject supervision" and "behavioral supervision" are now being implemented. The goal is to establish clear rules and ensure compliance. While regulatory sandboxes are still in discussion, they aim to test innovations safely. As the regulatory environment evolves, market participants must stay informed and adapt. The future of financial technology depends on balancing innovation with responsibility.

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