Chinese Authorities Apprehend Overseas Suspects and Freeze $160 Million in Cryptocurrency
The Chinese police have announced the country’s first successful case of confiscating cryptocurrency through a court ruling. Working in cooperation with the issuing institution, law enforcement managed to freeze and seize approximately $160 million worth of cryptocurrency from a gambling platform. In addition, three suspects located overseas were apprehended, marking a significant milestone in combating cross-border cybercrime.
The investigation into this immense cross-border online gambling case has been ongoing for two years, with the dedicated efforts of the special task force paying off. The case initially came to light when a distressed individual named Xiong reported to the Jishan Police Station in Shaying County, Hubei Province on July 28, 2021, seeking help after losing a significant sum of money through mobile gambling. What started as a seemingly simple case of using a mobile app for online gambling quickly revealed itself as a complex network of criminals operating on an unprecedented scale.
“728 Task Force” Decimates Criminal Syndicate, Seizes Computers, Mobile Phones, and More
The scale of the operation became evident as the police delved deeper into the case. The total amount of money involved reached a staggering 400 billion yuan ($62 billion), with over 50,000 individuals implicated. The servers supporting the gambling platform were located overseas, and the criminals employed sophisticated money laundering techniques involving cryptocurrencies, making it an unprecedented challenge for the local law enforcement agencies.
Upon receiving a briefing on the case from the Shaying County Public Security Bureau, Chen Shi, the Deputy Mayor of Jingmen City and Director of the Public Security Bureau, immediately ordered the formation of a special task force named “728,” comprising seasoned officers from both local and provincial agencies.
As the investigation progressed, it became clear that traditional investigative methods were inadequate to tackle the unique nature of this new form of cybercrime. The task force encountered numerous obstacles and challenges along the way:
- The gambling operation disguised itself as a chess and card game app, making it difficult to detect and locate the servers, which were hosted overseas.
- The core members of the criminal syndicate were based abroad, while they developed hundreds of offline agents within China, making their identification and apprehension extremely challenging.
- The flow of funds involved various complex processes, including online gaming tokens, bulk transfers through traditional bank cards, settlement platforms, and the whitewashing of virtual currencies. Tracing the funds and establishing links proved to be arduous tasks.
Undeterred by these challenges, the investigators tirelessly pursued leads related to the flow of funds, information, and individuals involved in the network. They realized that by focusing on the financial transactions, they could locate the key players in this intricate web of crime. Inspired by the concept that “all actions revolve around profits,” Zheng Daiping, Deputy County Mayor and Director of the Public Security Bureau, provided the breakthrough the investigators needed.
Recognizing that the organization and funds of the criminal syndicate resembled a complex network of blood vessels, the investigators understood that they needed to follow the money to find the heart of the operation. They developed a pioneering technique called the “money penetration method” to trace the flow of funds and establish crucial links, leading to the identification of multiple criminal groups involved in gambling, fund transfers, and intermediaries operating across the country.
From December 2021 to April 2022, the special task force conducted multiple arrest operations in Fujian, Sichuan, Guangxi, and Henan provinces. They successfully dismantled 14 related criminal organizations, apprehending over 130 suspects and confiscating more than 300 computers and mobile phones, along with 200 mobile phone and bank cards, 18 cash counting machines, and point-of-sale (POS) devices.
During the interrogations, the investigators discovered that all transactions among the participants were conducted using a specific virtual currency. By following the money trail, they managed to identify several accounts associated with the illicit virtual currency. The special task force coordinated with the issuing institution of the cryptocurrency, resulting in the freezing of the relevant accounts and preventing approximately $160 million worth of the virtual currency from falling into the hands of the criminal syndicate.
In October 2022, the People’s Court of Shaying County made a ruling to confiscate a portion of the frozen virtual currency, marking the first-ever court decision of its kind in China regarding the seizure of cryptocurrency.
However, the capture of the masterminds behind the operation, who had eluded arrest in foreign countries, remained a vital task to conclude the case. After nearly two years of meticulous investigation, the special task force, with the support and coordination of the Ministry of Public Security, initiated a cross-border operation. Five members of the task force, led by the Hubei Provincial Public Security Department, were deployed to apprehend the fugitives.
The arduous 59-day operation, involving collaboration with foreign law enforcement agencies, concluded triumphantly in December 2022, when the three principal suspects hiding abroad were captured and subsequently extradited back to China.
In June 2023, the main suspects, including Qiu Moumou, were formally transferred by the People’s Procuratorate of Shaying County to the People’s Court for trial. With the relentless efforts of the special task force, this case, known as the first-ever “virtual currency case” in China, has finally reached its conclusion.
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