A company that shares stories about coffee equipment R&D, agricultural technology, and physical stores, building its brand through marathons, dinners, social events, and offline outlets; participants are then guided to download the app, deposit USDT into a designated wallet, select different-term “tasks” on the platform, and earn additional rewards by referring friends to join.
Individually, physical projects, cryptocurrency payments, and user referrals do not necessarily imply illegality. However, when combined into a single high-return investment structure, determining the nature of the project requires looking beyond what it “sells,” which “cryptocurrency” it uses, or whether it has a physical store—instead, you must ask further: Are investment returns derived from genuine business operations, or from continuously incoming funds from new participants?
Image source: Screenshot from ChainCatcher’s public page
As of August 5, 2026, the Hong Kong Police have received 255 reports related to Fun Coffee, involving losses of approximately HK$104 million. The Hong Kong Police have arrested six individuals, while the Macau Judicial Police have separately arrested two women. Authorities revealed that the scheme purportedly focused on developing multifunctional coffee equipment and coffee gene technology, requiring participants to transfer USDT to designated wallets and then select various investment plans within the app, with the platform claiming annualized returns of approximately 197% to 278%. The case is still under investigation, and whether the individuals involved have committed crimes or their specific liabilities shall be determined solely by judicial authorities.
Physical projects can provide trust, but they cannot automatically verify the source of returns.
What makes Fun Coffee unique is that it doesn’t position itself directly as an exchange, on-chain investment platform, or token project; instead, it builds its investment narrative around coffee equipment, technology R&D, agricultural initiatives, and real-world business operations.
On July 13, 2026, the Hong Kong Securities and Futures Commission added the “Fun Coffee GCM Project” to its list of suspicious investment products. Public information from the Commission indicates that this investment arrangement involves the development and sale of technology products or agricultural equipment, such as a “cold brew high-efficiency extraction system” and a “food safety inspection and traceability module,” and was previously promoted to the public through marketing campaigns, websites, and social media in Hong Kong. Notably, the Commission classified it under “Other Investments,” rather than the “Digital Token-Related” category.
This classification clearly shows that whether a project constitutes an investment arrangement cannot be determined solely based on whether participants used USDT for payment. Regulatory focus remains on what participants contributed, how the project team manages funds, what rights participants acquired, and which business activities generate the returns.
Having physical stores, office spaces, promotional campaigns, or even real products only indicates that the project has engaged in certain business or marketing activities, but it does not directly prove that these operations can support the investment returns promised by the platform.
If a project claims that its returns come from coffee equipment sales or technology research and development, it should at least be able to explain: who the products were sold to, how much revenue was generated, how costs and profits were formed, and why the return rate increases according to a fixed formula the longer the investment term and the higher the deposit amount.
Marketing campaigns demonstrate that a project has been seen, not that its operational profits are sufficient to support the promised returns.
USDT is not merely a decorative element in the case, but the primary channel for funds entering the project.
Although the SFC Hong Kong classifies Fun Coffee as “other investments,” USDT is not a trivial payment detail within the project’s structure.
According to police disclosures, participants were required to transfer USDT to a designated cryptocurrency wallet address as instructed by the platform’s customer service. After completing the deposit, they had to select investment plans such as “Sail Off,” “Growth,” or “Voyage” within the app. One plan required an investment of approximately 10,800 USDT, with a return of about 680 USDT after 10 days, equating to an annualized return rate of approximately 230%. The platform also implemented mechanisms such as deposit bonuses, referral rewards, and daily check-ins.
This capital structure involves at least four distinct stages:
Funding Path: User purchases USDT → Transfers to the designated wallet → App displays account balance → Platform calculates and displays earnings
However, these four steps do not automatically form a complete investment cycle.
On-chain records can prove that USDT was transferred from one address to another, but they cannot alone prove which company controls the receiving wallet, nor can they confirm whether these funds were actually allocated to coffee equipment development, product sales, or agricultural projects. The principal and returns displayed in the app may not equate to the actual amount of USDT isolated or held on behalf of each participant by the project team.
For a properly functioning cryptocurrency investment or payment arrangement, the project team should at least be able to clearly explain:
Key verification points for project funding structure
USDT can improve the efficiency of cross-border transfers, but it may also cause participants to overlook the most fundamental question: who exactly they are entrusting their assets to.
Bank transfers typically display the recipient’s or company’s name, whereas a wallet address is merely a string of characters. If participants only confirm that “the coins have arrived” without verifying the address owner, the counterparty, or the purpose of the funds, the on-chain transfer may be complete, but the legal investment relationship remains unclear.
Tasks in the app cannot replace real investment logic.
Public reports indicate that some participants did not view themselves as investors but believed they were earning platform rewards by completing tasks through the app, becoming members, or helping the company promote its services. Some individuals even had acquaintances register and operate their accounts and complete deposits on their behalf, with limited understanding of the project’s operations or how returns were calculated.
This “task-based” design can weaken participants’ ability to assess investment risks.
When the platform stops using traditional financial terms like “principal investment” and “fixed returns” and instead adopts expressions such as “tasks,” “deposits,” “member rewards,” and “check-in earnings,” participants may mistakenly believe they are receiving activity subsidies, platform benefits, or business commissions.
However, legal and regulatory assessments typically do not rely solely on the name a project gives its product; instead, they examine the actual economic structure. If participants are required to first contribute assets, which are then centrally managed by the project team, and they receive returns as agreed upon, the arrangement may still exhibit the essential characteristics of an investment—even if the platform labels it as “completing tasks,” “purchasing equipment shares,” or a “membership program.”
The SFC notes that its list of suspicious investment products primarily covers arrangements that may have characteristics of collective investment schemes or other financial products but are offered to the public without authorization or sold by unlicensed entities. The SFC also emphasizes that the list serves as an early warning of potential risks and does not replace due diligence on specific projects.
Whether an arrangement constitutes a collective investment scheme is typically determined by examining whether participants lack day-to-day control over the relevant assets, whether funds or returns are centrally managed, and whether participants primarily rely on the operator’s management of the project to generate returns. Using USDT, an app, or the name of a “task” does not alter the assessment of these substantive factors.
The risk of tiered commissions lies not simply in “referring friends.”
Another key structure of the Fun Coffee case is that participants can earn additional rewards by referring friends and family to join. Public reports indicate that the platform implemented a referral commission system, with some “team leaders” managing hundreds of downlines. Certain participants not only invested their own funds but also produced promotional content, organized teams, and assisted others with registration or deposits.
However, “receiving a referral reward” does not necessarily equate to participating in illegal activities.
Referral commissions, channel rewards, and agent fees also exist in legitimate business promotions. What truly requires review is whether the rewards primarily come from sales of products and services or from funds paid by new participants; whether the project makes recruiting downlines the main condition for earning income; and whether promoters continuously promote investment plans, promise returns, assist with deposits, and receive tiered commissions based on the investments of their downlines.
Under Hong Kong’s Prohibition of Pyramid Schemes Ordinance, determining whether an arrangement constitutes a pyramid scheme requires close examination of whether new participants pay an entry fee and whether their payment is substantially influenced by the prospect of earning returns through recruiting other participants. The provision of goods or services does not automatically eliminate relevant legal risks. Similar provisions exist in China’s Prohibition of Pyramid Selling Regulations and the criminal offense of organizing and leading pyramid selling activities under the Criminal Law.
Therefore, distinguishing between ordinary participants, promoters, and project organizers cannot be based solely on titles used in WeChat groups or whether they have formal employment contracts, but rather on what they actually did.
Key areas of responsibility review for different participants
Even if you participated in the event and shared promotional information, your responsibility may differ entirely. Whether you knowingly recognized abnormalities in the project typically requires a comprehensive assessment based on your timing of participation, information possessed, source of returns, internal privileges, and actions taken after the project halted withdrawals.
Regulatory warnings, police investigations, and criminal convictions must be distinguished.
Fun Coffee has been listed on the SEC’s list of suspicious investment products, indicating that the project has attracted regulatory attention due to inquiries, complaints, or suspicious characteristics; however, this does not mean the SEC has legally determined that all participants have committed fraud.
Similarly, the arrest of individuals by police on suspicion of fraud does not mean that all those arrested will ultimately be convicted. Criminal liability must still be determined based on whether there were false representations, the actual use of funds, whether the project had a genuine operational foundation, the subjective awareness of the individuals involved, and their specific level of participation.
This is especially important for Web3 projects. After a project exhibits risk signals such as inability to withdraw funds, unrealistic returns, and pyramid-style promotions, it cannot be assumed that all staff, event guests, agents, and participants share the same level of responsibility.
For project teams and promoters, regulatory warnings are by no means a routine negative news item to be ignored. If, after the platform has been placed on a warning list, relevant parties continue to promise returns, recruit new participants, assist with deposits, or downplay regulatory information, these subsequent actions may serve as key evidence in determining their subjective awareness and degree of responsibility.
Attorney’s Observation
What the Fun Coffee case exposed is not a single “cryptocurrency scam scheme,” but a complex project structure:
Real-world projects build trust, offline events expand reach, USDT facilitates fund inflows, the app displays balances and earnings, and tiered commissions motivate participants to recruit new members.
Individually, these elements may all appear in legitimate business scenarios. However, to determine the legal nature of their combination, we must return to three fundamental questions:
Where does the money come from, where does it go, and what generates the returns?
For Web3 project teams, this case also serves as a reminder that crypto compliance is not limited to token issuance, operating trading platforms, or providing wallet services. Any real-world project that uses USDT as a fundraising and revenue settlement tool must also address issues related to wallet control, fund aggregation, app accounting, asset segregation, referral commissions, and regulation of investment products.
What truly warrants caution is not the mere coexistence of “coffee” and “USDT” in a project, but rather when real-world operations, on-chain funds, and tiered promotion fail to form a verifiable business loop—technology tools may merely obscure an already opaque financial structure, making it even harder to detect.
Author: Attorney Gao Mengyang