Chinese police have uncovered a large-scale underground banking operation that used cryptocurrency to facilitate cross-border fund transfers, resulting in multiple arrests.
According to a report by China National Radio published on February 12, 2025, the network laundered over CNY 1 billion ($136 million) across multiple provinces.
Authorities found that the group used digital currencies to bypass financial regulations, with key members involved in illicit foreign exchange transactions.
Investigators found that the network was composed of close associates, including family members and friends, who conducted unregistered foreign exchange transactions.
The group used domestic accounts to purchase crypto, which was then exchanged overseas for foreign currency.
Law enforcement began monitoring the network in June 2024 after detecting suspicious transactions in bank accounts.
Further examination of financial records revealed frequent fund transfers involving multiple personal and corporate accounts.
Authorities in Yanbian, Jilin, launched a formal investigation, leading to the arrest of seven key suspects in August 2024. The alleged leader later turned himself in, according to officials.
How Zhang Liang Exploited China’s Crypto Ban for Illegal Profits
Zhang Liang was the key figure of the network. After studying in Liaoning, he worked in tourism before moving abroad in 2016.
His personal use of underground banks for tuition and expenses led him to explore illicit currency exchange as a business.
Initially, Zhang profited from currency exchange rate fluctuations by providing services to overseas clients. He later expanded into unauthorized fund transfers, working with labor agencies and intermediaries.
The network spanned 10 provinces and led to the arrest of over 20 individuals.
The dismantling of this network sheds light on how underground banking operations are evolving to exploit digital currencies, a trend seen in other financial crime cases.
The widespread use of China’s crypto markets for unregulated cross-border transactions continues to challenge 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 cryptos are increasingly being used to facilitate these illicit transfers.
China has classified cryptocurrency-related financial activities as illegal under the “9.24 Notice” issued on September 24, 2021.
The regulation bans crypto-fiat exchanges, crypto-to-crypto transactions, token issuance, and digital asset-based financial services.
The case demonstrates how underground banking networks are adapting to tighter financial regulations by using crypto as a tool for cross-border fund transfers.
As digital assets operate outside traditional banking systems, digital currencies provide a discreet method for illicit transactions, making enforcement increasingly complex.
This crackdown points to increasing scrutiny of crypto-related crimes in China. As technology advances, criminals constantly adapt, forcing regulators to stay one step ahead.
Tighter oversight may drive more complex schemes and see the use of more decentralized, privacy-focused cryptocurrencies, challenging authorities across multiple jurisdictions.
Source:cryptonews.com
