Police: Chinese Crypto Ring Laundered US$1.7 Billion

Published: 14 December 2022

ripple-price-decline-woCryptocurrency used to launder funds from pyramid schemes, fraud and gambling. (Photo: QuoteInspector, License)

By Vinicius Madureira

In China’s latest crackdown on cryptocurrency fraud, police say they arrested 63 people suspected of helping domestic and foreign criminal groups launder the equivalent of US$1.7 billion through virtual currencies, according to a statement released last weekend.

More than 200 officers of the law in 17 provinces, autonomous regions and cities of the Inner Mongolia autonomous region carried out simultaneous operations over last week, a news release published by public security authorities said.

Police say they spotted an “abnormal flow” of money in a trading account held by a suspect who allegedly moved more than 10 million yuan (nearly $1.5 million) monthly. Once officials learned the account was allegedly being used to launder money, they froze it and moved in.

About $18.6 million in illegal income was confiscated.

The group is alleged to have begun operations earlier this year, helping criminals launder their funds from pyramid schemes, fraud and gambling.

The group then converted the funds into Tether, a stablecoin pegged to the US dollar, and then attracted new people from around the world to open crypto accounts and help launder the funds. Stablecoins are crypto currencies linked to fiat currencies or to commodities such as gold in an attempt to avoid wild swings in value.

According to the statement, “buying virtual currency anonymously and then selling it” is a way to avoid identification. “There is no way to query the flow of funds or find the payee through traditional means.”

“The query and retrieval of virtual currency is also very complicated,” it added.

Authorities in China said they “solved the case using multiple methods such as interrogating persons involved in the case, investigation on overseas digital currency exchanges, and digital currency blockchain tracking.”

According to the 2022 Crypto Crime Report by Chainalysis, cybercriminals often move their ill-gotten funds to a service where they can be kept safe from the authorities and eventually converted to cash.

“That’s why money laundering underpins all other forms of cryptocurrency-based crime,” the report said. If criminals cannot ultimately use the money, “there’s no incentive to commit crimes involving cryptocurrency in the first place.”

Between 2017 and 2021, cybercriminals laundered more than $33 billion worth of cryptocurrency. Last year, about $8.6 billion was laundered, which represented a 30 percent increase in money laundering activity over 2020.