Chinese police in Qingdao, Shandong Province recently cracked a major underground bank case that spanned 17 provinces and municipalities across China, involving a total amount of 15.8 billion Chinese yuan (approximately 69.9 billion New Taiwan dollars). They also arrested an exchange dealer who collaborated with this underground bank and engaged in illegal trading of virtual currencies.
According to China Central Television (CCTV) News, in November 2022, the Qingdao police discovered thousands of abnormal accounts linked to individuals such as Mr. Jin. These accounts had an average daily transfer amount of over 3 million Chinese yuan, with a total transaction amount exceeding 2 billion Chinese yuan. Additionally, these accounts exhibited abnormal characteristics such as round-the-clock high-frequency operations and quick transactions.
These accounts were operated through online banking or mobile banking, with the online operation addresses showing overseas locations. However, the account holders had never left the country, except for Mr. Jin’s son, who resided abroad for an extended period and had a matching online operation address. Therefore, the police suspected that Mr. Jin was the actual controller of these accounts.
The police stated that most of the individuals who transferred money to Mr. Jin’s controlled accounts had experiences of studying abroad or multiple short-term exits and entries. Furthermore, there were financial transaction records between these related accounts and other suspected underground banks within China. Therefore, it was determined that Mr. Jin was suspected of providing illegal foreign exchange services through his controlled bank accounts, as well as engaging in transactions with domestic underground banks, thus committing illegal business crimes.
Textile worker becomes an illegal virtual currency exchange dealer
According to investigations by the State Administration of Foreign Exchange and the public security authorities, there were over 20 million suspicious bank transaction records related to Mr. Jin, involving a transaction volume of over 10 billion Chinese yuan. However, the account situation was extremely abnormal, as a large amount of funds were concentrated and transferred to multiple bank accounts controlled by Mr. Li within China, with funds only going in and not out.
What’s even more surprising is that Mr. Li is an ordinary employee of a textile enterprise in a county-level city. The transfer amount of funds associated with her affiliated and controlled third-party bank cards amounted to over 5 billion Chinese yuan. It turns out that her other identity was actually an exchange dealer 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 certain overseas cryptocurrency trading platform.
The State Administration of Foreign Exchange of China pointed out that underground banks collect Chinese yuan from customers and then purchase virtual currencies, which are then sold through overseas trading platforms to obtain the required foreign currency funds. This process involves the conversion between Chinese yuan and foreign currencies, constituting illegal foreign exchange trading activities.
After obtaining solid evidence, the investigators carried out a crackdown operation, during which the Qingdao police seized approximately 2 million Chinese yuan worth of virtual currencies, including USDT and Litecoin. Currently, the case has been transferred to the procuratorate for review and prosecution.
Trading virtual currencies constitutes illegal foreign exchange trading
The report pointed out that in China, virtual currencies do not have the same legal status as legal tender, and engaging in activities related to virtual currencies constitutes illegal financial activities. At the same time, trading foreign currencies in China must be conducted at designated locations appointed by the state; otherwise, it is considered illegal foreign exchange trading, and those with serious circumstances may face criminal liability.
Previously, the Guangdong Provincial Higher People’s Court in China also shared a case, indicating that it is possible to violate the law by buying USDT at a cheap price and selling it for profit. Some defendants acquired USDT from individual cryptocurrency investors at a price lower than the platform price, and then sold it at the exchange rate of the US dollar, earning the price difference and making a profit, constituting illegal business operations.
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USDT
China
Underground Bank
Virtual Currency