China Busts Illegal Gambling Ring That Laundered Almost $6B Through Cryptocurrency

Posted on: September 28, 2022, 07:22h. 

Last updated on: September 30, 2022, 04:24h.

Chinese authorities have reportedly taken down a massive criminal gang operating in the Hunan province. The group operated an illegal gambling network and telecom scams, utilizing cryptocurrencies to launder at least $5.6 billion in proceeds.

Chinese police
Chinese police parade a suspect accused of operating an illegal gambling site and laundering funds through cryptocurrency wallets. The group reportedly used cryptocurrency wallets to launder as much as $5.6 billion. (Image: Hengyang Police Department)

Chinese media outlet Weixin reports 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 around CNY300 million (US$41.4 million) in the process.

They also recovered around CNY7.8 million (US$1.07 million) that they could trace back to some victims. Those individuals will reportedly receive those funds, even though some may have participated in gambling, a crime everywhere across the country.

More Criminals to Fall

Because of the magnitude and intricacy of the operation, an investigation to determine its size and scope is going to take a while. As law enforcement officials continue to scrutinize 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, converting 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 participating in offshore gambling.

At the same time, authorities have shut down 80 online platforms and 47 affiliates. They also closed 27 businesses that helped the platforms launder money. In total, police seized around CNY170 million (US$23.53 million) during the operations.

Online gambling has gained in popularity because of China’s ongoing issues with COVID-19. With travel options limited, more people are turning to online platforms, which are easy to launch and to move around to avoid detection.

Crypto Exchange Became Unwitting Accomplice

Blue Whale Finance, another Chinese media outlet, reports that cryptocurrency exchange Binance is participating in the investigation. Company officials wouldn’t comment, only acknowledging that it is doing what it can to provide assistance where possible.

The media outlet indicates that the exchange holds “a large number” of the accounts used to facilitate the gang’s money laundering. Tracing the accounts to physical people is a challenge due to the anonymity crypto wallet addresses provide.

This doesn’t mean authorities can’t find out who’s behind a wallet. Crypto forensic specialists now have the skills to detect and track wallet users. This has already led to several high-profile arrests across the globe.

In addition, 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 relation to the criminal case.

They learned that their accounts are frozen indefinitely, pending the outcome of the investigation. Binance told those users who want to learn more or receive status updates that they’ll have to contact the police for details.

Crypto Unwelcome in China

China has strengthened its disdain for digital assets over the past year, except for its own central bank digital currency (CBDC). It views crypto like bitcoin and others as nothing more than a fraud, and banned crypto trading last September.

In May of last year, it implemented a ban on crypto mining. Despite the ban, the Cambridge Centre 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.

Inarguably, China’s stance on crypto stems, in part, from the introduction 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. That is more difficult to do with bitcoin and other cryptocurrencies.