Abstract:
• The US Department of Justice has arrested two Chinese citizens on charges related to an international cryptocurrency fraud case involving $73 million.
• This scam is called "Pig Killing Plate", involving money laundering through shell companies.
• The case highlights the growing scrutiny of "pig slaughter" schemes involving Crypto Assets.
The US Department of Justice (DOJ) has arrested two Chinese citizens, Daren Li and Yicheng Zhang, for orchestrating a large-scale cryptocurrency scam known as "Ponzi scheme," involving at least $73 million in money laundering activities.
This arrest operation highlights that "Ponzi scheme" fraud is still a major issue in the encryption industry.
The duo is an international fraud syndicate
According to the DOJ, officials arrested Li on April 12 at Hartsfield-Jackson Atlanta International Airport and transferred him to central California. Meanwhile, Zhang was arrested in Los Angeles.
The Deputy Attorney General of the Ministry of Justice, Lisa Monaco, said:
"We announce the arrest of two foreign citizens who are charged with leading a money laundering scheme associated with international cryptocurrency investment fraud. Cryptocurrency investment fraud exploits the borderless nature of virtual money and online communication to deceive victims."
The DOJ found that they coordinated extensively from communications to facilitate international Money Laundering, including discussing the network's commission structure, the various shorter shell companies used, victim information, and at least one video of an accomplice calling a U.S. financial institution.
Li and Zhang manage an international "pig slaughter" investment scam group. They instructed accomplices in Money Laundering networks to open bank accounts in the name of shorter shell companies. Once the victim sent the funds to the shorter shell company, Li and Zhang monitored the lower-level accomplices, transferring the proceeds to an overseas bank account at Deltec Bank in the Bahamas.
This plan involves converting over $73 million into USDT stablecoin. In addition, a cryptocurrency wallet in this plan has received over $341 million in virtual assets.
Li and Zhang are charged with conspiracy to commit money laundering and six substantive counts of international money laundering. If convicted, they face a maximum sentence of 20 years for each count.
The US Secret Service Assistant Director of Investigations, Brian Lambert, explained in response to this case that the US financial infrastructure is being threatened by sophisticated financial fraud schemes.
Lambert pointed out: "Complex financial fraud schemes like 'Ponzi schemes' pose an obvious and urgent threat to America's financial infrastructure, as countless Americans continue to fall victim to this predatory activity."
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The main types of cybercrime divided by number of complaints|Source: Federal Bureau of Investigation
Lambert's statement is consistent with the data from the Federal Bureau of Investigation (FBI). According to the FBI's 2023 Internet Crime Report, investment fraud is the most costly crime event tracked by the IC3 program.
Investment fraud losses increased from $3.31 billion in 2022 to $4.57 billion in 2023, a rise of 38%. A total of 17,823 complaints related to trust/romance crimes were received throughout the year.
Analysis of the scam of "Ponzi Scheme" with false promises and empty wallets
'Pig Killing' scams involve scammers creating fake identities to contact potential victims, usually through text messages, social media platforms, or dating apps. Gradually, these scammers develop a seemingly real relationship with their target through regular and friendly interactions. This method is similar to the practice of fattening pigs before slaughter, hence the name.
Once a relationship is established, scammers introduce cryptocurrency into the conversation. They typically do not directly ask for money or cryptocurrency. Instead, they offer assistance with investment strategies and guide victims to platforms they control.
Initially, victims may transfer a small amount of funds to a cryptocurrency exchange. In order to make the scam credible, the fraudster provides false account information, showing that the victim's investment is increasing.
They may even allow the victim to withdraw part of their initial investment in order to appear legitimate. The scammers keep pressuring their victims to send more long funds until they run out of money completely.
A UN report describes the Mekong region in Southeast Asia as the epicenter of this criminal activity. More and more casinos are combining with the ungoverned borders and armed groups in long-standing conflicts in Myanmar. This backdrop creates ideal conditions for large-scale money laundering activities.
Conclusion:
This successful crackdown on the "Ponzi scheme" cryptocurrency fraud case demonstrates the cooperation and determination of international law enforcement agencies in combating cross-border financial crimes. The arrests and charges against Daren Li and Yicheng Zhang by the US Department of Justice send a clear warning to potential fraudsters: using cryptocurrency for illegal activities will be severely punished by the law, regardless of their location. This not only reflects the zero-tolerance attitude of the law towards financial crimes but also demonstrates a firm commitment to protecting investor interests and maintaining financial market order.
At the same time, this case also reminds investors and the public to increase their vigilance against cryptocurrency-related scams. Investors should conduct thorough investigations and risk assessments when investing in cryptocurrencies to avoid becoming victims of fraud. Regulatory agencies and law enforcement departments in various countries should strengthen cooperation, jointly formulate and implement effective regulatory policies to promote the healthy development of the cryptocurrency industry, ensure its full potential is realized, and minimize risks.