In recent years, criminal organizations in Taiwan have been using cryptocurrencies for fraud and money laundering, tarnishing the reputation of the cryptocurrency industry. There have even been cases of well-known exchanges being involved in large-scale fraud, which is shocking. How much resources and effort has the Ministry of Justice invested in protecting the public? How far has the investigation of cryptocurrency crimes progressed? To reveal the level of importance the judiciary places on cryptocurrency crimes, we have invited Mr. Hong Minchao, a prosecutor from the Northern District Prosecutors’ Office.
The favorite method of fraud groups is to use cryptocurrencies, and money laundering through cryptocurrencies has become mainstream. The Ministry of Justice is not turning a blind eye to this issue and has been expanding its cryptocurrency investigation system.
What should we think of the fact that the ACE Exchange’s responsible person was involved in fraud?
As cryptocurrencies have entered the practical stage, crimes have also spread through blockchain, especially fraud and illegal money flows using tokens on the chain. Are there loopholes in the law? We have invited Mr. Hong Minchao, a prosecutor who is on the frontlines of cryptocurrency crime in Taiwan, to reveal what the judiciary has been doing to prevent and investigate cryptocurrency crimes. How much resources has the judiciary allocated to fight fraud and prevent crimes?
Prosecutor Hong Minchao works at the Taipei District Prosecutors’ Office and is also an early participant in the cryptocurrency industry. He is familiar with the cryptocurrency industry and has served as a lecturer for the Financial Supervisory Commission, the Anti-Money Laundering Office of the Executive Yuan, and the Control Yuan. He is particularly skilled at teaching judicial personnel about cryptocurrency crime investigation and anti-money laundering on the blockchain. When asked about the prevalence of cryptocurrency money laundering, he regretfully stated that “roughly 40% of illicit funds are laundered using cryptocurrencies,” which is quite alarming.
In the detailed explanation, it is mentioned that in current fraud cases, roughly 30% involve enticing victims to invest or purchase cryptocurrencies to extract funds. The remaining cases involve other forms of fraud, and the stolen funds are later converted into cryptocurrencies. These cryptocurrency funds account for at least 40% of all fraud cases, with an estimated NT$3 billion being hidden on the blockchain each year, using domestic and foreign exchanges, DeFi programs, and mixing services for money laundering.
Regarding this point, through contact with other judicial personnel, it has been learned that cryptocurrency money laundering is prevalent in Taiwan, not only for converting fraud funds into the most common USDT but also for other crimes such as drug trafficking, illegal gambling, and bribery, where large amounts of funds are converted into cryptocurrencies for money laundering, disposing of stolen property, and organizing more crimes.
Prosecutor Hong mentioned that cryptocurrency crimes in Taiwan have been rampant, but the subsequent law enforcement has not been idle. “We have been paying attention to cryptocurrency crime investigations for almost ten years. Now, our colleagues are also trying to learn about cryptocurrencies and their technologies in their personal time.” In other words, the Ministry of Justice has long been prepared for cryptocurrency investigations, but due to the diverse nature of DeFi technology and the continuous emergence of new money laundering methods on the blockchain, effective cryptocurrency investigations require cooperation between private entities and official authorities.
The prosecutor emphasized that the current prosecutors, investigators from the Investigation Bureau, criminal police, and police officers in Taiwan are enthusiastic about combating fraud and have comprehensive knowledge of cryptocurrencies. District prosecutors across the country support each other in investigating cryptocurrency crimes and have a good understanding of basic DeFi and tracing money flows. In terms of international judicial cooperation, Taiwan also actively collaborates with many countries in the field of cryptocurrency money laundering.
From the perspective of law enforcement in Taiwan and the perspective of multiple arrests of cryptocurrency criminals, the cryptocurrency investigations in Taiwan are well-suited for combining money flow analysis with traditional investigations, providing a more comprehensive perspective for the younger generation of prosecutors and investigators with different expertise in handling cases.
However, in terms of limited judicial resources, for the overall investigation and law enforcement department, with the rapid development and changes in the cryptocurrency industry and technology, there is still room and necessity for the education, training, and experience sharing of relevant regulatory personnel. Although the Ministry of Justice has fully understood its significance, it is currently limited by budget constraints and can only allocate resources to the most urgent needs, with training time being urgent. In addition, with the influx of a large number of cases, this aspect is still not sufficiently supported compared to the resources and internal education and training for general criminal cases. It will require further allocation of official resources in the future.
Previously, the founder of ACE Exchange, Pan Yizhang, and the new person in charge who bought all the shares, Wang Chenhuan, were both detained and denied visits for their involvement with a fraud group. They were revealed to have used the method of “issuing token projects” to promote profits to victims and have the tokens listed on the exchange to gain the trust of investors. Will such methods be prevented after the implementation of cryptocurrency regulations? Prosecutor Hong Minchao believes that this major crime serves as a good reminder for domestic VASP operators.
Regarding market makers on cryptocurrency exchanges, the prosecutor also has personal opinions.
Furthermore, the prosecutor hopes that domestic VASP operators can achieve the desired results in terms of resource integration, such as establishing a wallet address database or a common fund, to promote anti-money laundering and even compensation for victims. These actions will have a positive impact on the cryptocurrency industry.
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