Case Overview: Virtual Currency Cross-Border Exchange Ring Busted
The Shanghai Jing'an District People's Procuratorate has recently initiated a public prosecution against a cross-border virtual currency illegal exchange case involving over 200 million yuan. Five defendants, including the mastermind Li, were sentenced by the court to prison terms ranging from six to two and a half years, along with fines of 1.5 million to 300,000 yuan. Four other individuals received non-prosecution decisions due to minor involvement. The investigation is ongoing for one additional suspect, bringing the total number of people brought to justice to nine.
Discovery: SAFE Monitoring Flags Suspicious Activity
In July 2024, the State Administration of Foreign Exchange (SAFE) identified abnormal transaction patterns linked to Company Z during routine monitoring. The company appeared to be using virtual currencies to facilitate cross-border asset transfers for domestic clients. Given the massive amount involved, SAFE transferred the case to the public security authorities through the administrative-criminal coordination mechanism. Between September and December 2024, suspects Gao and three others were arrested, while Chen and another suspect voluntarily surrendered.
Modus Operandi: 'Private Bank' Facade and Virtual Currency Correspondent Model
Company Z was registered overseas in 2019 by Zhou (handled separately) and marketed itself as a 'private bank' with a custom virtual banking app to create a legitimate appearance. In China, it maintained only an office without any foreign exchange license. When clients needed currency exchange, they were referred by study-abroad and immigration agents Fu and Chen. Customer managers Gao and Li arranged for traders and customer service representatives to set up chat groups with clients. Clients were instructed to purchase virtual coins from designated cryptocurrency merchants and deposit them into Company Z's overseas virtual wallet. The gang then converted the virtual coins into foreign currency abroad and transferred the funds to clients' designated overseas accounts. The entire process involved no actual cross-border fund flows; instead, settlement occurred via domestic and overseas liquidity pools. Company Z charged a 3% exchange fee, with 0.5% kickbacks to agents.
Legal Classification: Administrative-Criminal Coordination and Sentencing
The court found the defendants guilty of illegal business operations. Sentences were determined based on the amount involved, criminal circumstances, and factors such as voluntary surrender and meritorious performance. The four individuals receiving non-prosecution decisions had minor roles and showed remorse. The case reaffirms that using virtual currencies for cross-border correspondent exchange—even without actual fund flows—constitutes illegal foreign exchange dealing and carries criminal liability.
Industry Warning: Virtual Coins as New Tools for Illicit Exchange
This case underscores the growing use of virtual currencies as instruments for illegal financial activities. Compared to traditional exchange methods, virtual currencies offer anonymity and cross-border convenience, making funds harder to trace. Regulators are strengthening enforcement through big data monitoring and administrative-criminal coordination. Industry experts warn that both individuals and institutions involved in such 'correspondent' exchange face significant legal risks, ranging from administrative penalties to criminal prosecution.