Chinese Police Bust $296 Million Illegal Crypto-Based Underground Bank

Chinese authorities have uncovered and closed down an underground bank that exploited crypto to facilitate illicit currency exchange operations between the Chinese yuan and the South Korean won.

The Public Security Bureau of Panshi City, Jilin Province, successfully arrested six suspects involved in the case. The suspects completed transactions amounting to approximately 2.14 billion yuan ($295.8 million).

Key points:

• The underground bank used cryptocurrency to circumvent China’s strict capital control policies.
• Suspects exploited the anonymity, decentralization, and borderless nature of crypto to conduct illegal Chinese foreign exchange transactions.
• The criminal group used domestic accounts to receive and transfer funds, and engaged in over-the-counter (OTC) cryptocurrency trading.
• Clients included South Korean purchasing agents, cross-border e-commerce platforms, and import/export trade firms.
• Police seized a large number of bank cards and crime tools during the arrests.

According to a state media report published on Sunday, the Economic Investigation Brigade of the Panshi City Public Security Bureau first discovered important clues about the illegal operation during their routine work. 

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Chinese Suspects used domestic funds for fund transfer

The investigation revealed that two residents of Jilin, Jin Moudong and Shen Mou, had collaborated to carry out Korean currency exchange business in South Korea and China.

Upon further analysis of the bank accounts under the suspects’ names, the police found substantial daily inflows and outflows of funds, frequent and varied transactions, and a large number of trading customers. Also, the fund transactions exhibited characteristics consistent with illegal underground bank operations.

To gain a comprehensive understanding of the gang’s organizational structure and the whereabouts of their funds, the police task force conducted extensive research and analysis on the suspects’ bank fund movements and social relations. 

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Investigations revealed that the criminal gang had illegally engaged in foreign exchange business by utilizing domestic accounts for receiving and transferring funds, OTC trading of virtual currencies, and Korean won settlement.