Chinese Authorities Uncover $136 Million Money Laundering Operation Tied to Cryptocurrency

Chinese authorities have uncovered a significant underground banking scheme that utilized cryptocurrency to enable cross-border fund transfers, resulting in multiple arrests.

According to a report by China Nationwide Radio published on February 12, 2025, the network laundered over CNY 1 billion ($136 million) across various provinces.

Officials found that the group employed digital currencies to circumvent financial regulations, with key members involved in illegal foreign exchange transactions.

China’s Crypto Crackdown: Authorities Target Underground Banking Network

Investigators revealed that the network consisted of close associates, including family and friends, who conducted unregistered foreign exchange transactions.

The group utilized domestic accounts to acquire cryptocurrency, which was subsequently exchanged abroad for foreign currency.

Law enforcement began monitoring the network in June 2024 after identifying suspicious transactions in bank accounts.

Further analysis of financial records uncovered frequent fund transfers involving numerous personal and corporate accounts.

Authorities in Yanbian, Jilin, initiated a formal investigation, leading to the apprehension of seven primary suspects in August 2024. The alleged leader later surrendered, according to officials.

How Zhang Liang Exploited China’s Crypto Ban for Illegal Profits

Zhang Liang was the central figure of the network. After studying in Liaoning, he worked in tourism before relocating abroad in 2016.

His personal reliance on underground banks for tuition and expenses prompted him to explore illegal currency exchange as a business opportunity.

Initially, Zhang benefited from currency exchange rate fluctuations by offering services to overseas clients. He later expanded into unauthorized fund transfers, collaborating with labor agencies and intermediaries.

The network spanned 10 provinces and resulted in the arrest of over 20 individuals.

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— Cryptonews.com (@cryptonews) February 11, 2025

The disbanding of this network highlights how underground banking operations are evolving to exploit digital currencies, a trend observed in other financial crime cases.

The extensive use of China’s crypto markets for unregulated cross-border transactions continues to pose challenges for law enforcement.

Crypto Crimes on the Rise: Underground Banks Turn to Digital Currency

In 2023, 18 out of 49 underground banking cases investigated in Yanbian involved digital currency transactions.

Investigators noted that underground banks often rely on cross-border mirror transactions, and cryptocurrencies are increasingly being used to facilitate these illegal transfers.

China has classified cryptocurrency-related financial activities as illegal under the “9.24 Notice” issued on September 24, 2021.

The regulation prohibits crypto-fiat exchanges, crypto-to-crypto transactions, token issuance, and financial services based on digital assets.

This case illustrates how underground banking networks are adapting to stricter financial regulations by utilizing crypto as a tool for cross-border fund transfers.

As digital assets operate outside traditional banking systems, digital currencies offer a discreet method for illicit transactions, complicating enforcement efforts.

This crackdown indicates increasing scrutiny of crypto-related crimes in China. As technology evolves, criminals continuously adapt, compelling regulators to remain proactive.

Tighter oversight may lead to more complex schemes and an increased use of decentralized, privacy-focused cryptocurrencies, challenging authorities across multiple jurisdictions.

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