Posted on: September 28, 2022, 07:22h.
Last updated on: 28 September 2022, 07:22h.
Chinese authorities have reportedly taken down a massive criminal gang operating in Hunan province. The group ran an illegal gambling network and telecom scams and used cryptocurrencies to launder at least $5.6 billion in proceeds.
Chinese media Weixin reported that the bust is part of a larger “100-day action” exercise to crack down on crime in China. Police arrested 93 people across the country for their alleged involvement, freezing accounts holding about CNY300 million (US$41.4 million) in the process.
They also recovered about CNY7.8 million (US$1.07 million) which they were able to trace back to some victims. Those individuals will apparently receive those funds, even though some may have participated in gambling, a crime across the country.
More criminals to fall
Due to the scope and complexity of the operation, an investigation to determine its size and scope will take some time. As law enforcement continues to investigate the data, other arrests are likely.
Officials began investigating the outfit in 2018. They determined that the group used collection and payment points across China to convert funds from illegal gambling and fraud into cryptocurrency. They then converted the digital currency into US dollars and transferred those funds to financial companies.
China has carried out a number of raids on illegal gambling this year. In Shanghai alone, there have been more than 800 arrests of people involved in foreign gambling.
At the same time, authorities shut down 80 online platforms and 47 affiliates. They also shut down 27 businesses that helped the platforms launder money. In total, police seized about CNY170 million (US$23.53 million) during the operations.
Online gambling has become popular due to China’s ongoing problems with COVID-19. With limited travel options, more people are turning to online platforms, which are easy to launch and move around to avoid detection.
Cryptocurrency Exchange has become unwitting accomplice
Blue Whale Finance, another Chinese media outlet, reports that the cryptocurrency exchange Binance is participating in the investigation. Company officials declined to comment, only acknowledging that they are doing what they can to assist where possible.
The media outlet indicates that the exchange holds “a large number” of the accounts used to facilitate the gang’s money laundering. However, tracing the accounts to physical people is a challenge due to the anonymity that crypto wallet addresses provide.
That doesn’t mean authorities can’t figure out who’s behind a wallet. Crypto forensics specialists now have the skills to track and trace wallet users. This has already led to several high-profile arrests around the world.
Additionally, an increasing number of jurisdictions require users to register and follow Know Your Customer policies. This is the case with some of Binance’s users. Several received a message from the exchange in connection with the criminal case.
They learned that their accounts were being frozen indefinitely, pending the outcome of the investigation. Binance told those users who want to learn more or receive status updates that they will need to contact the police for details.
Crypto unwelcome in China
Over the past year, China has strengthened its disdain for digital assets, except for its own central bank digital currency (CBDC). It considers crypto like Bitcoin and others nothing more than a scam, and banned crypto trading last September.
In May last year, it also added a ban on crypto mining. Despite the ban, the Cambridge Center for Alternative Finance reported earlier this year that illegal mining is thriving in the country. It now accounts for around 22% of global mining activity.
Arguably, China’s stance on crypto stems in part from the launch of its own digital yuan. The use of the CBDC continues to expand in the country, giving authorities almost complete control over its people’s finances. It is more difficult to do with Bitcoin and others.
There have also been discussions of an expansion to Macau. However, the results may not be as promising as China expects. Instead, it could lead to an even greater increase in illegal and offshore gambling.