Prosecutors in Shanghai, China have cracked a cross-border virtual currency exchange case involving over 200 million yuan.

Mars Finance News: On July 1, 2024, the People’s Procuratorate of Jing’an District, Shanghai, China disclosed that recently, it has, in accordance with the law, filed a public prosecution against Li on suspicion of the crime of illegal business operations. Li is involved in an illegal foreign exchange crime syndicate that used virtual currencies for cross-border “matching” in illegal foreign exchange exchanges. On June 10, the case was opened for trial and a judgment was pronounced in court on the same day, bringing an end to a series of illegal business cases spanning 3 years, with an involved amount of more than 200 million yuan.

In July 2024, during routine monitoring, the State Administration of Foreign Exchange found abnormal leads that Company Z used virtual currencies to transfer assets across borders for domestic clients. The matter was then transferred to public security authorities for handling. Upon investigation, it was found that Company Z was registered overseas and established in 2019. It packaged and promoted itself outwardly under the name of a “private bank,” and developed a virtual bank app to create an appearance of legitimacy, but it did not obtain the required license to operate foreign exchange business in China, and in essence engaged in illegal foreign exchange exchange activities.

The syndicate targeted high-net-worth individuals overseas with capital needs such as purchasing property, immigration, and studying abroad. Through intermediaries, personnel including account managers, traders, and customer service staff connected customers to the exchange process. Customers purchased virtual currencies from virtual currency counterparties using RMB and transferred them to Company Z’s overseas virtual wallets. The syndicate then, overseas, exchanged the virtual currencies into foreign currencies and transferred them into overseas accounts designated by the customers. Throughout the entire process, there was no real cross-border movement of funds; instead, settlements were conducted separately through domestic and overseas fund pools. Company Z collected a 3% exchange service fee from this, and paid a 0.5% “benefit fee” to intermediaries.

In this case, a total of 9 people were brought to court, and another principal offender is still under investigation. After review, it was determined that the relevant persons jointly violated national laws and regulations, illegally bought and sold foreign exchange, and disrupted the financial order; the circumstances were serious or especially serious. They should be held criminally liable for the crime of illegal business operations. The court sentenced five people including Gao and Li to fixed-term imprisonment ranging from six years to two years and six months, and imposed fines ranging from 1.5 million yuan to 3 million yuan. For the other four people including Chen and Huang, because their criminal circumstances were relatively lighter, the amounts involved were relatively smaller, and they voluntarily pleaded guilty and accepted punishment, the procuratorial authorities, in accordance with the law, made a decision not to prosecute them with qualification.