China’s law enforcement busts $5M virtual currency money laundering ring

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Security agents in China have uncovered a money laundering ring that allegedly used virtual currencies to carry out their nefarious activity. The Hengyang County Public Security Bureau disclosed that the gang was responsible for laundering over $5.5 billion (RMB40 billion).

A police spokesperson revealed in a press statement that 93 persons were arrested in connection to the case at over 10 different locations. Apart from the seizure of funds worth RMB300 million ($41.8 million), authorities confiscated over 100 electronic gadgets from the suspects.

The spokesperson revealed that the criminal gang was led by Hong Moumou and engaged in fraud and illegal gambling across China. To mask the proceeds of illicit activity, Hong’s gang used a vast network of local companies and gold as a front.

The statement from the police also revealed that the gang turned to virtual currencies to cover the money trail and then converted the assets to United States dollars. Local police say they recovered RMB7.8 million ($1.08 million) belonging to victims of the gang’s fraudulent activities despite their attempts at obfuscating their financial footprint with digital assets. 

Investigation into the crackdown dragged on for months, with reports noting that the gang had been carrying out their nefarious activities since 2018. The gang’s activities were mostly centralized in Hainan, Guangdong, Fujian, and Jiangxi, according to police reports.

If convicted, the suspects could face up to 10 years in jail for their actions, and China’s negative stance on digital assets could see them receive even harsher punishments. China had previously made virtual currency transactions illegal and imposed stiff penalties on offenders, including lengthy jail sentences and payment of fines.

The Chinese witch hunt

China was once home to a majority of BTC miners and accounted for over 70% of the network’s hash rate before government regulators banned using digital assets for transactions and precluded banks and financial institutions from settling transactions.

The witch hunt was extended to virtual currency mining and service providers, which led to a mass exodus of miners from the country to new jurisdictions. The government has seen the blanket ban as a ploy to promote its digital yuan, a central bank digital currency (CBDC) issued by the People’s Bank of China (PBoC).

Despite the ban, there is speculation that some miners never left mainland China. Authorities said the miners went underground and are masking their activities using mining pools and virtual private networks.

Watch: The BSV Global Blockchain Convention panel, Law & Order: Regulatory Compliance for Blockchain & Digital Assets