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Beijing Police dismantle an $111M crypto-laundering network linked to telecom fraud and gaming.
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China’s First Prosecution for Wallet Key Theft Sets New Standards for Managing Virtual Assets
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A new legal interpretation in China clarifies the fact that virtual assets used to commit crimes are considered laundering.
Beijing police discovered a massive money laundering network that allegedly moved around 800 million yuan ($111,36 million) via cryptocurrency transactions related to telecom fraud and gambling online.
This criminal operation used overseas cryptocurrency platforms to hide the origins and sources of illegal funds. It created a challenge for Chinese officials fighting cyber and financial crime.
First time in jail for wallet key theft: New legal milestone
The Beijing police action follows a precedent in China where the Xuhui district procuratorate in Shanghai prosecuted people for illegally obtaining private keys of digital wallets, China’s first such case.
Read also: China and UAE vow to crack down on crypto-enabled crime in joint statement
Officials claim that three suspects, among them a man named Liu, conspired together to insert a backdoor in a virtual wallet app.
This security breach allowed the perpetrators access to 10,203 private keys and 27,622 mnemonics. The Xuhui District Procuratorate, in collaboration with the Public Security Bureau, drafted guidelines for managing virtual currency in criminal litigation.
Virtual Assets and Money Laundering: Legal Interpretation
Recently, the Supreme People’s Court of China and the Supreme People’s Procuratorate of China issued a legal definition for the use of virtual currencies in money laundering. According to Article 191 in the Criminal Law, virtual asset transactions that are used to transfer or hide criminal proceeds may be considered money laundering.
Attorney Shao Shiwei clarified, if virtual assets were used to receive funds related to any of seven predicate criminal offenses under money laundering laws then such transactions would qualify as money laundering.
Attorney Liu Yang also noted that this action marks a first inclusion of “virtual” assets within a judicial definition of money laundering crimes. This is a step in clarifying the legal framework as a response to the increasing cases involving digital currency.
China’s ban on domestic cryptocurrency exchanges is still in place despite the stronger legal position. The individual holding or trading of virtual currencies is not explicitly prohibited, but the new interpretation could lead people to weigh more carefully the legal implications.
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