Chinese Authorities Dismantle $295 Million Illegal Crypto Ring
Chinese authorities have dismantled a $295 million illicit crypto operation in a significant crackdown on illegal cryptocurrency activities. The operation, described as an “underground bank,” exploited the anonymity and ease of cross-border crypto transactions to facilitate illegal foreign exchange.
The Crackdown in Panshi City
The Panshi City Public Security Bureau in Jilin Province spearheaded the operation. Local media reports reveal that the suspects utilized cryptocurrency’s anonymous nature to conduct unlawful foreign exchange transactions. The authorities arrested six individuals linked to the scheme, which involved purchasing foreign exchange with cryptocurrencies.
Cross-Border Crypto Transactions
The investigation unearthed that the criminal gang had transferred approximately 2.14 billion renminbi (Chinese Yuan | Around $295.79 million) across borders using cryptocurrency channels. “The police found out that the criminal gang, in this case, illegally engaged in foreign exchange business by using domestic accounts to receive and transfer funds, [over-the-counter] OTC trading of virtual currencies, Korean won settlement, etc., helping Korean purchasing agents, cross-border e-commerce, import and export trading companies, and other groups to actualize the exchange of RMB and exchange of Korean won,” the report reads.
OTC Platforms and Regulatory Challenges
Despite the significance of the bust, the police did not disclose the name of the over-the-counter (OTC) platform involved. This raid coincides with a recent initiative by the Hong Kong Monetary Authority (HKMA) to target illegal OTC services. Chinese nationals are suspected of using these platforms to circumvent overseas transfer limits.
Hong Kong, operating under the “one country, two systems” principle, maintains distinct crypto regulations from mainland China. While mainland China has prohibited all private crypto activities since 2021, Hong Kong continues to allow them. Between July 2022 and June 2023, the volume of crypto transactions in Hong Kong reached approximately $64 billion, primarily driven by the OTC market.
The Persistence of Crypto Trading in China
Despite strict bans, mainland Chinese citizens have continued to find ways to access cryptocurrencies. In January, reports surfaced of Chinese investors using an underground network of brokers to obtain cryptocurrencies. Some investors engage in direct crypto trading, meeting in public places to exchange wallet addresses and finalise transactions using cash or bank transfers.
A Detailed Investigation
The Panshi City investigation highlighted the sophistication of the underground bank’s operations. Authorities discovered that the suspects, Jin Moudong and Shen Mou, managed extensive fund transfers and maintained a large customer base, indicating substantial daily inflows and outflows. Their activities bore the hallmarks of illegal underground banking.
Conclusion
Dismantling this illegal crypto operation underscores the challenges authorities face in regulating cryptocurrency transactions. As crypto continues to offer anonymity and borderless transfer capabilities, it remains a tool for illicit activities, prompting ongoing efforts by law enforcement to curtail such practices.
