Case Overview: $28M Crypto Cross-Border Swap Case Brought to Trial
The People's Procuratorate of Shanghai Jing'an District has recently indicted a criminal case involving illegal cross-border foreign exchange swapping using virtual currencies, with a total amount exceeding 200 million yuan (approximately $28 million). The main defendant, identified as Li, along with four other individuals, has been sentenced by the court to fixed-term imprisonment ranging from six years to two years and six months, and fines from 1.5 million yuan to 300,000 yuan. Four other implicated persons were granted relative non-prosecution. The case originated in July 2024 when the State Administration of Foreign Exchange (SAFE) detected abnormal clues during routine monitoring, indicating that Company Z was using virtual currencies to transfer assets cross-border for domestic clients. Due to the large amount involved and potential criminal nature, the case was transferred to public security organs via the 'administrative-criminal coordination' mechanism. Between September and December 2024, four suspects including Gao were arrested in succession, while two others (Chen and another) voluntarily surrendered. A total of nine individuals have been brought to justice so far, while one main suspect is still under investigation.
Company Z's Operation Model: 'Private Bank' Facade Hiding an Illegal Currency Exchange Chain
Company Z was registered overseas in 2019 by a person named Zhou (handled separately), and marketed itself externally as a 'private bank', complete with a self-developed virtual banking application to create a legitimate appearance. The company only maintained an office in mainland China without obtaining any foreign exchange business license, engaging in illegal currency exchange activities. The case reveals a complete illegal exchange chain: when clients with foreign exchange needs approached intermediary agents such as Fu and Chen (who specialized in study-abroad and immigration services), these intermediaries referred them to Company Z. Customer managers Gao and Li then arranged for traders and customer service staff to set up communication groups to handle client requirements. Clients were instructed to purchase virtual coins from OTC dealers in various ways and deposit them into Company Z's overseas virtual wallets. The group then exchanged the virtual coins for foreign currencies abroad and transferred them to clients' designated overseas accounts. Throughout this process, no actual cross-border fund flows occurred – only domestic and overseas fund pools were settled separately to achieve the transfer effect.
Profit Distribution and Regulatory Warning
Company Z charged a service fee of 3% of the transaction amount for the currency exchange, and paid 0.5% commission to the intermediaries. This model essentially leverages the anonymity of virtual currencies and cross-chain liquidity to circumvent foreign exchange controls. Virtual currency cross-border swapping has long been a target of Chinese regulatory crackdowns. This case once again demonstrates the efficiency of the 'administrative-criminal coordination' mechanism between financial regulators and law enforcement. It is worth noting that although the main defendants have been sentenced, one key suspect remains under investigation, which may lead to further revelations. Cryptocurrency practitioners and cross-border fund service providers must be acutely aware of the legal risks of such illegal financial activities; compliant operation is the only sustainable path forward.