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China Dashes Crypto Hopes Again, Hailing Zhao Dong’s Prison Sentence

Last Updated December 28, 2023 11:25 AM
Teuta Franjkovic
Last Updated December 28, 2023 11:25 AM

Key Takeaways

  • Zhao Dong’s seven-year prison sentence underscores China’s rigorous crackdown on illegal crypto activities.
  • Chinese authorities are intensifying efforts to unearth and dismantle financial frauds and foreign exchange scams.
  • Investigations in China reveal the sophisticated use of crypto in bypassing foreign exchange laws.

In a major action against unlawful cryptocurrency activities, China’s Supreme Procuratorate has sentenced  Zhao Dong, founder of RenrenBit and a minor shareholder in Bitfinex, to seven years in prison.

The well-known figure  in the crypto community was convicted for operating illegal business ventures and participating in unlicensed foreign exchange transactions, highlighting China’s ongoing efforts to curb illegal practices in the cryptocurrency sector.

Major Blow to OTC Crypto Market

Zhao Dong, a key player in the over-the-counter (OTC) cryptocurrency market and a minor shareholder in Bitfinex, has faced serious legal repercussions amidst China’s heightened crackdown on illicit crypto operations.

His entrepreneurial activities in the crypto sphere have hit a roadblock following the joint efforts of the Supreme People’s Procuratorate and the State Administration of Foreign Exchange, focusing on crimes related to foreign exchange. Zhao’s sentencing is a part of a larger initiative by Chinese authorities, emphasizing their determination to root out illegal financial activities, especially those with cross-border implications.

This action is underscored by a string of eight high-profile cases, signifying the government’s steadfast approach in addressing and curbing illegal financial maneuvers in the crypto industry.

The range of offenses in the series of cases recently addressed by Chinese authorities extends from fraudulent foreign exchange dealings to intricate financial scams, highlighting the government’s unwavering commitment to combatting financial misconduct.

In their pursuit of justice, Chinese officials have conducted thorough investigations, meticulously tracing and decoding complex financial transactions, primarily targeting accounts linked to these illicit activities.

The case against Zhao Dong and his associates, emblematic of this crackdown, was established on solid grounds, utilizing objective evidence such as bank records, communication logs, confessions, and witness statements. This comprehensive approach demonstrates the government’s resolve in addressing and eradicating financial improprieties within its jurisdiction.

Tackling Sophisticated Foreign Exchange Fraud

China’s intensified crackdown on financial crimes illuminates the evolving landscape of foreign exchange criminality. Offenders are increasingly resorting to more elaborate tactics, including the use of “counter-attacking” strategies. These involve independently maneuvering domestic and foreign funds to slip past regulatory oversight.

The emergence of virtual currencies and social media platforms as tools for unlawful financial transactions poses additional complexities for law enforcement. The Supreme People’s Procuratorate, in collaboration with the State Administration of Foreign Exchange, is steadfast in its dedication to safeguarding financial security.

Their joint efforts are focused on cultivating a stringent environment that deters illegal cross-border financial activities, with the goal of preserving the resilience and integrity of China’s financial infrastructure.

Illegal Bank Exploiting Crypto for Foreign Exchange Evasion

On December 24, revelations surfaced  about the unearthing of an illegal banking operation utilizing cryptocurrencies to circumvent foreign exchange laws. Xu Xiao, an official from Qingdao’s branch of the State Administration of Foreign Exchange, shed light on the scheme: underground banks were acquiring virtual currencies and then selling them on international trading platforms to procure foreign currency, an act constituting an illegal exchange between the yuan and other foreign currencies.

In the course of the investigation, authorities confiscated digital currencies worth approximately $28,000 (200,000 Chinese yuan), including assets like Tether and Litecoin (LTC).

The elaborate scheme involved the transfer of funds surpassing $2.2 billion (15.8 billion Chinese yuan), which was funneled through over a thousand bank accounts in 17 different regions. This case underscores the growing challenges faced by regulatory bodies in monitoring and controlling financial transactions in the age of digital currencies.

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