Chinese police in Qingdao, Shandong Province recently cracked a major underground money lending case that spanned 17 provinces and municipalities across China. The amount involved in the case reached a staggering 15.8 billion RMB (approximately 69.9 billion NTD), and one money changer who cooperated with the underground money lending operation and engaged in illegal trading of virtual currencies was apprehended.
According to a report by China Central Television (CCTV) News, in November 2022, the Qingdao police discovered that the accounts of individuals such as Mr. Jin were highly abnormal, with daily transfer amounts averaging over 3 million RMB and a total transaction amount exceeding 2 billion RMB. These accounts exhibited abnormal characteristics such as round-the-clock high-frequency trading and rapid buying and selling.
These accounts were operated through online banking or mobile banking, with the online operation addresses displayed overseas. However, the individuals who opened these accounts had never left the country, except for Mr. Jin’s son who had been residing abroad for an extended period and whose online operation address coincided with these accounts. Therefore, the police suspected that Mr. Jin was the actual controller of these accounts.
The police stated that most of the individuals who remitted funds to accounts controlled by Mr. Jin had experience studying abroad or multiple short-term visits abroad, and there were records of fund transactions between these related accounts and other suspected underground money lending accounts within China. Therefore, it was determined that Mr. Jin was suspected of providing illegal exchange services through the bank accounts under his control, as well as engaging in transactions with other domestic underground money lending operations, thus engaging in illegal business activities.
Textile industry employee becomes illegal virtual currency money changer
According to the investigation by the State Administration of Foreign Exchange and public security authorities, over two million suspicious bank transaction records related to Mr. Jin were found, with a transaction volume exceeding hundreds of billions of RMB. However, the account situation was highly abnormal. A large amount of Mr. Jin’s funds were concentrated and transferred to multiple bank accounts controlled by Ms. Li within China, and the funds only flowed in without flowing out.
Interestingly, Ms. Li is an ordinary employee of a textile company in a county-level city. The transfer amount of funds associated with her related and controlled third-party bank cards reached over 5 billion RMB. It turned out that her other identity was actually a money changer specializing in illegal trading of virtual currencies. She helped Mr. Jin exchange a large amount of funds into virtual currencies such as USDT through a foreign virtual currency trading platform.
The Chinese State Administration of Foreign Exchange pointed out that underground money lenders collect RMB from customers and then purchase virtual currencies, selling them through overseas trading platforms to obtain the required foreign currency funds. This process involves the conversion of RMB and foreign currency, constituting illegal foreign exchange trading activities.
After obtaining solid evidence, the investigators carried out a coordinated action, and the Qingdao police seized approximately 2 million RMB worth of virtual currencies, including USDT and Litecoin, on the scene. Currently, the case has been transferred to the prosecutor’s office for review and prosecution.
Trading virtual currencies is considered illegal foreign exchange trading
The report pointed out that in China, virtual currencies do not have the same legal status as fiat currencies, and engaging in activities related to virtual currencies is considered illegal financial activities. At the same time, trading foreign exchange in China must be conducted in designated venues by the state; otherwise, it is considered illegal foreign exchange trading, and serious cases may result in criminal liability.
Previously, the Guangdong High People’s Court in China also shared a precedent, stating that it is possible to violate the law in China by cheaply acquiring USDT and reselling it for profit. There have been cases where individuals purchased USDT from retail investors in the cryptocurrency market using cash at prices lower than the platform price, and then sold them based on the USD exchange rate of the day, earning the price difference and making a profit, constituting illegal business operations.