China Sentences Five Individuals for $166 Million Cryptocurrency Money Laundering Scheme

China Jails Five for $166M Crypto Money Laundering Scheme

In a notable case of financial crime linked to cryptocurrency, a court in Beijing has sentenced five people to prison for their involvement in an illegal foreign exchange scheme that funneled over $166 million through cryptocurrency channels. This significant prosecution highlights China's intensified efforts to regulate digital asset activities.

Key Takeaways

Sentencing of Offenders: Five defendants received prison sentences ranging from two to four years for their roles in a $166 million crypto money laundering operation.
Sophisticated Tracking: The case demonstrates Beijing's advanced abilities to investigate cross-border cryptocurrency transactions.
Warnings About Stablecoins: Officials have raised alarms over stablecoins' impact on global financial stability and have vowed to maintain strict oversight of digital currencies.
Revocation of Stablecoin Plans: Major companies like Ant Group and JD.com have halted their plans to issue stablecoins in Hong Kong, following government directives.

Overview of the Case

The operation came to light during the 2025 Financial Street Forum Annual Meeting on October 28, illustrating how carefully Chinese regulators are monitoring and prosecuting financial crimes involving cryptocurrencies. Between January and August 2023, the group conducted an elaborate scheme that converted client money into USDT stablecoins for unlawful cross-border transfers, processing a staggering 1.182 billion yuan (approximately $166 million) across various accounts.

Authorities disclosed that the group utilized virtual currency as a "bridge" for illicit foreign exchange trading, with individual members managing sums between 149 million and 469 million yuan.

Advanced Forensic Techniques Uncovering the Scheme

Lin Jia led the operation, coordinating with Lin Yi, Xia, Bao, and Chen to manipulate client funds through numerous bank accounts registered in their names. By converting yuan payments into USDT via various Tether trading platform accounts, they executed cross-border transactions while profiting from the conversions.

Prosecutors used specialized technical methods to tackle the inherent challenges of crypto investigations, integrating financial data analysis with blockchain transaction tracing. They observed suspicious fund flow patterns that contradicted the defendants’ claims of legitimate "crypto speculation."

To substantiate the evidence, the procuratorate remotely accessed data from foreign platforms, ensuring compliance with legal standards while strengthening their case. This thorough approach helped resolve what prosecutors termed the "evidence collection dilemma" associated with cross-border economic crimes.

The Haidian District People’s Court issued its judgment on March 21, 2025, with all five defendants choosing not to appeal their sentences. The case is expected to serve as a reference point for authorities dealing with similar crypto-related financial crimes.

Regulatory Warnings on Stablecoins

During the same Financial Street forum, Pan Gongsheng, governor of the People's Bank of China, expressed strong concerns regarding the risks posed by stablecoins to global financial stability and monetary sovereignty. He pointed out that stablecoins currently fail to meet critical financial regulation requirements, highlighting vulnerabilities in areas like customer identification and anti-money laundering efforts.

Pan indicated that stablecoins have exacerbated weaknesses within the global financial system, possibly facilitating terrorism financing and money laundering. He confirmed that the PBoC remains firm in its zero-tolerance stance toward private digital currencies while closely monitoring developments in the global stablecoin market.

These warnings come as the market capitalization of stablecoins has reached around $310 billion, with Tether and USD Coin making up approximately 84% of the total supply and facilitating over $46 trillion in annual settlements.

China Jails Five for $166M Crypto Money Laundering Scheme

Impact on Tech Giants and Stablecoin Plans

In mid-October, Ant Group and JD.com were compelled to abandon their stablecoin issuance initiatives in Hong Kong after receiving direct orders from the PBoC and the Cyberspace Administration of China. These officials reiterated that the authority to issue currency must rest solely with the state.

This decision reversed prior progress, as Ant had previously outlined plans for stablecoin licenses in Hong Kong, Singapore, and Luxembourg in June. Despite this setback, Ant has filed trademarks in Hong Kong for various virtual assets and blockchain technologies, including “ANTCOIN.” Notably, its Whale blockchain platform processed over one-third of global payment transactions exceeding $1 trillion last year.

In August, Chinese regulators directed brokerages and research entities to cease promoting stablecoins and hosting related seminars, citing concerns over fraud and speculative risks. This regulatory environment appears to limit the adoption of stablecoins in the region.

Last month, Hong Kong's emerging stablecoin licensing framework garnered interest from 77 banks, tech companies, and Web3 startups, although officials warned that only a limited number of licenses would be issued in the initial phase.