By: Toh Han Shih
In defiance of China’s ban on cryptocurrency, a now-defunct crypto exchange, FTX Trading, facilitated mainland money laundering, while Samuel Bankman-Fried, the imprisoned former boss of FTX, bribed Chinese officials, US court documents show. The bribery and money laundering occurred in China at a time when cryptocurrency was banned in the country. FTX was once one of the world’s biggest cryptocurrency exchanges but imploded amid billions of dollars of fraud and embezzlement. FTX and Alameda Research, a related company which traded cryptocurrency, as well as over 130 other related companies filed for Chapter 11 bankruptcy protection in the US in November 2022. The 42-year-old Bankman-Fried co-founded Alameda and FTX. He was formerly the chief executive officer (CEO) of FTX, while his erstwhile girlfriend, Caroline Ellison, was previously a CEO of Alameda. On March 28, Bankman-Fried was sentenced by a US court to 25 years in prison for orchestrating multiple fraudulent schemes. On September 24, Ellison was sentenced to two months in prison in the US for fraud. On October 30, Nishad Singh, a former director of engineering at FTX, was sentenced to three years of supervised release in the US for his role in the fraud and was ordered to forfeit US$11 billion. A US court document alleges 46 defendants including 26 Chinese nationals and 20 unnamed defendants acted in concert to operate a network of accounts through which billions of dollars were laundered. “Defendants are members of an international criminal syndicate who used FTX to launder billions of dollars in criminal proceeds. In the months leading up to the filing of Debtors’ bankruptcy petitions, Defendants withdrew millions of dollars of their criminal profits from FTX, at the expense of other customers of the FTX.com exchange,” alleged the complaint, filed in the US Bankruptcy Court for the district of Delaware on November 10. “The defendants were a conglomerate of Chinese nationals who used FTX to execute a years-long money laundering scheme beginning on March 29, 2020. The scheme lasted until FTX shut down most of the accounts on November 3, 2022 – but not before Defendants had deposited and withdrawn billions of dollars in criminal proceeds from FTX,” the complaint added. The period which the alleged money laundering in China occurred overlapped with the time when cryptocurrency transactions were forbidden. In September 2021, the Chinese government banned all forms of cryptocurrency transactions, declaring them illegal. In the same month, FTX moved its headquarters from Hong Kong to the Bahamas. In this action, the FTX receivers are seeking to recover funds allegedly laundered by the defendants and prevent them from claiming them. Most of the named Chinese defendants lived in Nanchang, the Jiangxi capital. One defendant, Deng Jun, lived in Nanchang. He and his wife Shen Ling, another defendant, owned two apartments in Shenzhen, where Shen Ling lived, and another in Nanchang. “Shen Ling became one of the most prolific members of the criminal syndicate. In the two-and-a-half years in which her account was active, she made more than 8,000 deposits in cash and/or cryptocurrency into her FTX account totaling approximately US$1.79 billion, and more than 9,000 withdrawals in cash and/or cryptocurrency from her FTX account also totaling approximately US$1.83 billion,” the complaint alleges. “None of the Named Defendants had sufficient net worth to fund the massive deposits they were making,” the complaint alleges. The defendants “worked jobs that do not pay anywhere near the amounts that they were depositing. For example, Qin Yong Qiang is the owner of a small noodle shop in Fuzhou City, but he deposited over US$1.5 million into his FTX account. And Huang Yao is a school teacher, but he deposited over US$581 million into his FTX account. The mysterious sources of wealth indicate that the funds deposited by Defendants were proceeds from criminal activity,” Defendant Huang Yao – a schoolteacher – publicly bragged on QQ, Chinese social media, of his riches: “F1. Purchase a 500-square-meter house in Beijing (completed); 2. Get a Range Rover Evoque (completed); 3. Open a coffee shop (completed); 4. Have two model class partners (completed); 5. Realize a gain of 300 percent in the stock market (completed); 6. Earn an annual income of RMB 6 million (completed).” The only goal Huang had not achieved? “7. Correct my old habit of bragging.” The account registered under the name Huang Yao was actually controlled by one or more individuals who used the fake name, alias, and/or stolen identity “Huang Yao” to register it through which the individual(s) could launder criminal proceeds, the complaint alleged. Likewise, multiple individuals used the identities of the defendants Li Ping, Jia Shuyun and Chen Chao, the complaint alleged. Alleged bribery of Chinese officials Bankman-Fried used millions of dollars of cryptocurrency to bribe unnamed Chinese officials, alleged a complaint filed with the US District Court of the Southern District of New York on November 12. A US indictment charges him with conspiring with others to violate the US Foreign Corrupt Practices Act (FCPA), with a multi-million-dollar bribe scheme to regain access to Alameda's cryptocurrency trading assets that were frozen by Chinese law enforcement. In early 2021, Chinese authorities froze Alameda trading accounts worth about US$1 billion on two of China’s largest cryptocurrency exchanges. Around November 2021, Bankman-Fried directed a multi-million-dollar bribe to seek to unfreeze the accounts, alleged the complaint. At that time, about 40 million USDT (a cryptocurrency backed by the US dollar) was transferred from an Alameda cryptocurrency wallet hosted by FTX to a private wallet on the direction of Bankman-Fried, as part of the initial payment to unfreeze the accounts, the complaint added. After confirming that the accounts were unfrozen, Bankman-Fried authorized additional payments to be made of tens of millions of US dollars in cryptocurrency to complete the bribe, the complaint alleged. “Thereafter, other individuals known and unknown laundered the Bribe Payment through multiple additional private wallets, in order to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds.” In December 2021, the FTX wallet transferred the 40 million USDT through a series of other private wallets and about 22 million USDT ended up in a wallet of Binance Holdings. Given China’s ban had been in force since September 2021, the transfer of cryptocurrency in December 2021 violated the ban. Binance is one of the largest operational cryptocurrency exchanges in the world. In a separate legal action on November 10, the FTX receivers filed against Changpeng Zhao, the Chinese-born Binance CEO, seeking to recover US$1.76 billion, which the receivers alleged was fraudulently transferred to Binance. Toh Han Shih is chief analyst of Headland Intelligence, a Hong Kong risk consultancy This is among the stories/excerpts we choose to make widely available.If you wish to get the full Asia Sentinel experience and access more exclusive content, please do subscribe to us for US$10/month or US$100/year.
|
