Three Charged in $10,000,000 Crypto Money Laundering Scheme: DOJ

Published: Nov 16, 2023
Written By:
Vignesh Karunanidhi
Milk Road Writer

The US Department of Justice announced charges on Thursday against three individuals—Zhong Shi Gao, Naifeng Xu, and Fei Jiang—for allegedly perpetrating a complex crypto money laundering scheme to defraud banks of over $10 million. The trio allegedly laundered the stolen funds through cryptocurrency exchanges.

Federal prosecutors with the US Attorney’s Office for the Southern District of New York levied the following accusations:

  • From 2018 to 2022, the defendants recruited individuals to open bank accounts under their control at various US branches.
  • They then orchestrated fraudulent wire transfers between these accounts and reported the transactions as unauthorized to trigger improper account credits.
  • The defendants rapidly drained the credited funds as cash or cryptocurrency before the banks detected the ruse, leaving accounts overdrawn.

$10 million in total losses across 11 banks

  • Through this tactic, the defendants are allegedly responsible for over $10 million in actual losses spread across nearly a dozen financial institutions.
  • The fraudulently obtained funds were allegedly laundered through unnamed foreign cryptocurrency exchanges.

Zhong Shi Gao, Naifeng Xu, and Fei Jiang were each arrested on Thursday and face the following criminal charges:

  • One count of bank fraud conspiracy (maximum 30 years imprisonment)
  • One count of conspiracy to commit wire fraud against a financial institution (maximum 30 years imprisonment)
  • One count of money laundering conspiracy (maximum 20 years imprisonment)
  • One count of aggravated identity theft (mandatory consecutive 2-year sentence)

“Schemes like this harm institutions and make it tougher to report suspicious transfers. The arrests today serve as a warning to anyone thinking of attempting to engage in bank fraud. The FBI will hold you accountable in the criminal justice system.”

Announcing the arrests, FBI Assistant Director James Smith said.

Prosecutors emphasized the message that turning to cryptocurrency will not allow fraudsters and cybercriminals to evade law enforcement. Sophisticated tracking tools can uncover illicit money flows, even when laundered through digital assets.

The alleged $10 million bank fraud scheme provides another reminder that cryptocurrencies are not beyond the reach of US authorities, despite perceptions that they afford anonymity. The three defendants now face decades in prison if convicted on all counts.

Vignesh Karunanidhi
Milk Road Writer
Vignesh has been a seasoned professional in the crypto space since 2017. He has been writing for over 5 years and specializes in writing and editing various types of crypto content, including news articles, long-form pieces, and blog posts, all focused on sharing the beauty of blockchain and crypto.