Chinese criminal gangs are using cryptocurrencies to launder billions of dollars, some of which are obtained by helping to drug the United States or defrauding American victims.
These gangs take advantage of the decentralized nature of the cryptocurrency market to evade regulation inside and outside China, use cryptocurrencies to launder the profits of drug trading and illegal gambling, and make huge sums of money in the cryptocurrency market by promising easy money, setting up investments**.
Since 2018, multiple cryptocurrency addresses linked to some of China-based suspected chemical dealers have received more than $37.8 million worth of assets in exchange for a key ingredient in fentanyl, the research firm chainalysis said in a report last year. These shipments are typically shipped to Central America and Mexico, where they are processed into fentanyl by local drug cartels and then shipped to the United States.
Last October, the U.S. Office of Foreign Assets imposed sanctions on a China-based network of individuals and businesses for producing and selling ingredients used to make fentanyl and other drugs. The U.S. Treasury Department said some of these individuals hold cryptocurrency wallets that they use to send and receive funds.
According to the latest data from the Centers for Disease Control and Prevention (CDC), fentanyl use in Americans has become a major public health problem, causing more than 100,000 deaths each year. It's also a rare common front between the two superpowers, the United States and China: the two countries agreed to work together this year to tackle the problem.
These cases highlight the changing nature of money laundering, with cryptocurrencies becoming an increasingly popular tool for money laundering, replacing the old method of transporting boxes of cash.
This change poses a challenge for investigators, but it also provides them with a new way to track the flow of money, as most records of cryptocurrency flows are kept on a public ledger.
According to a joint investigation report released in January this year by Singapore-based blockchain data platform ChainArgos and China-based blockchain research firm Bitrace, the people who committed the scam to several victims in China and Florida shared two cryptocurrency wallet addresses, meaning they are likely to belong to the same gang. One of the wallets has processed at least $20.7 million worth of cryptocurrency since the beginning of 2021, the report said. The study found that illicit funds from these two addresses were later deposited into two major cryptocurrency exchanges, OKX and Huobi (now known as HTX).
Jonelle Still, an adjunct professor of blockchain analytics at the Middlebury Institute of International Studies, said American victims have a hard time recovering their money because many have lost $10,000 or less, which may be some people's life savings, but the Federal Bureau of Investigation For other departments, this amount is too small to be taken seriously.
Anti-fraudsters say the transnational nature of these criminal groups further makes it more difficult to catch criminals or help victims recover their assets, as different countries** need to cooperate with each other.
For years, China** has taken a tough stance on cryptocurrencies, including shutting down exchanges, banning trading, and throwing several executives who have worked in the industry in jail. In January this year, China*** said it would submit a revised anti-money laundering law to the highest legislative body for consideration. According to legal experts, addressing the role of cryptocurrencies in money laundering is the most pressing issue.
Rory Doyle, head of financial crime policy at financial software provider Fenergo, said: "A blanket ban on crypto exchanges is one way to go, but it doesn't seem to be working. ”
China** said in January that law enforcement agencies across the country had cracked more than 800 cases, dismantled five "underground banks" used for money laundering, and traced about $4 billion worth of money based on blockchain data. China** partnered with blockchain analytics firm OKLink to track wallets where cryptocurrencies can be stored and transferred.
At the end of 2022, China** arrested 63 suspects linked to a criminal gang that used cryptocurrencies to launder money in an operation involving 17 provinces.
Chinese prosecutors have also filed a lawsuit against prominent cryptocurrency executives. Zhao Dong, the founder of Renrenbit, China's largest over-the-counter cryptocurrency platform, was sentenced to seven years in prison in 2022 for providing cryptocurrency exchange services to an illegal business involved in overseas gambling and so-called "pig slaughter."
*We say that these gangs use Tether to convert between different fiat currencies. Tether is a stablecoin pegged to the U.S. dollar.
*From the Wall Street** Hotspot Engine Project