War on Crypto Crime: Chinese Police Dismantle $1.9 Billion Underground Banking Ring

On May 15, the Chengdu Public Security Bureau announced the dismantling of a vast underground banking network, arresting 193 suspects across China.

These individuals were involved in illegal businesses utilizing crypto, specifically Tether (USDT). The comprehensive crackdown revealed illicit transactions totaling approximately 13.8 billion yuan (~$1.9 billion).

How Chinese Authorities Crack Down on Crypto Crimes

The investigation started in November 2022 when authorities detected suspicious activities involving underground banks in Chengdu’s Longquanyi District. Consequently, they formed a specialized task force, incorporating experts from various police departments. This also included economic investigation, cyber security, and legal affairs.

This group provided unauthorized foreign exchange settlements, effectively bypassing national regulations.

Read more: 9 Best Crypto Wallets to Store Tether (USDT)

On June 1, 2023, following directives from the Ministry of Public Security, the task force executed coordinated raids across several major cities, including Shanghai and Shenzhen. These efforts led to the capture of key figures in the criminal syndicate, such as Lin, Weng, and Chen, along with 25 others.

During these raids, law enforcement seized a plethora of bank cards and digital payment instruments linked to criminal activities.

Further investigations uncovered that, since January 2021, the syndicate had exploited its import and export business to facilitate illegal activities. By using USDT as a medium, they circumvented official foreign exchange channels to service clients needing to transfer funds internationally.

Moreover, these operations were intricately linked to other illicit activities, including financial fraud and smuggling.

Zhong Yu, captain of the Eighth Brigade of the Economic Investigation Detachment at the Chengdu Municipal Public Security Bureau, highlighted the complexity of the network.

“The suspect settled funds through underground banks and was suspected of engaging in illegal foreign exchange criminal activities,” Yu said.

Also, on May 13, BeInCrypto reported that the Chinese government arrested six people. They are allegedly responsible for illicit crypto transactions worth $295 million. These arrests underline the challenges and risks associated with crypto in unregulated environments.

Read more: Crypto Regulation: What Are the Benefits and Drawbacks?

Meanwhile, the Hong Kong police recently apprehended three men at a currency exchange shop after a deceptive transaction involving Tether’s USDT. The suspects allegedly showed a customer ceremonial “hell money” before deceitfully persuading him to transfer about $128,073 worth of USDT, only to refuse the agreed-upon cash exchange afterward.

“Hell banknotes are a form of ceremonial paper money that is burned as an offering to ancestors or deities in traditional Chinese culture,” SCMP explains.