Shanghai’s Hongkou Public Security Bureau has recently cracked a case involving the use of cryptocurrency for cross-border illegal settlement and illegal foreign exchange trading, according to a BlockBeats report published on Aug. 28. Police arrested nine suspects, and the amount involved exceeded 200 million yuan.
Two platforms were set up to run exchange and settlement services
Authorities said suspect Li and others began the operation in early 2024. To seek illegal profits, they established a technology company and built two online platforms: one described as a “cross-border fund exchange” platform and another for “virtual credit card issuance and settlement.” The group allegedly attracted clients both online and offline and illegally conducted exchange and settlement business involving cryptocurrency and cross-border funds.
Police said the group generated illegal gains by charging transaction fees, spending service fees, card application fees, and withdrawal fees.
Investigators said the platforms formed a closed-loop illegal financial system
Case handlers said: “What makes this case unusual is exactly this. The criminals developed two apps and openly solicited customers on such a large scale, which we had never seen before. The platforms built in this case were themselves a closed-loop illegal financial service system, with all transactions settled within the platforms. This model of crime operates at a larger scale, with a longer chain and stronger deception.”
How the two platforms allegedly operated
According to the report, on the “cross-border fund exchange” platform, the group collected customers’ cryptocurrency overseas and converted it into foreign currency, forming a “capital pool.” It then used methods including fabricating false contracts to conduct cross-border foreign exchange settlement, enabling transfers and conversion between cryptocurrency and the Chinese yuan.
On the “virtual credit card issuance and settlement” platform, the group allegedly “cooperated” with several overseas private banks to issue virtual credit cards to clients. Clients could use the cards for spending, but repayment had to be settled in cryptocurrency. The group then converted the cryptocurrency into foreign currency overseas and completed settlement with overseas card providers through false cross-border foreign exchange settlement.