Chinese police in Qingdao, Shandong Province recently cracked a major underground money-lending case that spanned across 17 provinces and municipalities in China. The amount involved reached 15.8 billion yuan (approximately 69.9 billion New Taiwan dollars), and one underground money-lender involved in illegal buying and selling of virtual currency was arrested.
In November 2022, the Qingdao police discovered that thousands of accounts belonging to individuals including a person named Jin were extremely abnormal. The average daily transfer amount exceeded 3 million yuan, with a total transaction amount exceeding 2 billion yuan. These accounts were operated through online banking or mobile banking, and the online operation addresses were shown to be overseas. However, the account holders had never left the country, except for Jin’s son who had been residing outside of China for an extended period. The police suspected Jin to be the actual controller of these accounts.
The police stated that most of the individuals who transferred money to Jin’s controlled accounts had experience studying abroad or frequently traveling in and out of the country. Furthermore, there were financial transactions between these related accounts and other suspected underground money-lending accounts within China. Therefore, it was determined that Jin was involved in providing illegal foreign exchange services through his controlled bank accounts and was also engaged in transactions with other domestic underground money-lenders, constituting illegal business operations.
A textile industry worker became an illegal virtual currency money-lender. According to the investigation conducted by the National Foreign Exchange Bureau and public security authorities, there were over 20 million suspicious bank transaction records related to Jin, with a transaction volume exceeding hundreds of billions of yuan. However, the account situation was extremely abnormal. A significant amount of Jin’s funds were transferred to multiple bank accounts controlled by Li within China, and the funds could only be deposited but not withdrawn.
Interestingly, Li was an ordinary employee of a county-level textile enterprise, but the transfer amount of the associated and controlled third-party bank cards under her name reached over 5 billion yuan. It turned out that she was also a money-lender specializing in illegal buying and selling of virtual currency. She helped Jin convert a large amount of funds into virtual currencies such as USDT through a foreign virtual currency trading platform.
The China State Administration of Foreign Exchange pointed out that underground money-lenders collect Chinese yuan from customers and then purchase virtual currencies, which are subsequently sold through overseas trading platforms to obtain the required foreign currency funds. This process involves the conversion between Chinese yuan and foreign currencies, constituting illegal foreign exchange trading.
After obtaining solid evidence, the investigators conducted a crackdown operation. The Qingdao police on-site confiscated approximately 2 million yuan worth of virtual currencies, including USDT and Litecoin. Currently, the case has been transferred to the procuratorate for review and prosecution.
The buying and selling of virtual currencies are considered illegal foreign exchange trading in China. As reported, virtual currencies do not have the same legal status as legal tender in China, and engaging in related business activities is considered illegal financial activities. Additionally, trading foreign exchange in China must be conducted at designated locations by the government; otherwise, it is considered illegal foreign exchange trading, and individuals involved may face criminal liability.
Previously, the Guangdong High People’s Court in China also shared a precedent, stating that it is possible to violate the law in China by obtaining USDT at a low price and reselling it for profit. Some defendants purchased USDT from individual investors in the cryptocurrency market at a price lower than the platform price, and then sold it based on the USD exchange rate of the day, earning the price difference and making a profit, which constituted illegal business operations.
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