2 Chinese Nationals Face Charge in ‘Pig Butchering’ Crypto Scam

The Department of Justice in Washington on Jan. 4, 2024. Madalina Vasiliu/The Epoch Times

Two Chinese nationals were charged in an alleged cryptocurrency scam that laundered more than $73 million, according to the U.S. Department of Justice (DOJ).

The two suspects were identified as Daren Li, 41, a dual citizen of China and St. Kitts and Nevis, and Zhang Yicheng, 38, a citizen of China and a Temple City, California, resident. According to a DOJ statement issued on May 17, Mr. Li was arrested at the Hartsfield-Jackson Atlanta International Airport on April 12, while Mr. Zhang was arrested in Los Angeles on May 16.

“Cryptocurrency investment scams exploit the borderless nature of virtual currency and online communications to defraud victims,” Deputy Attorney General Lisa Monaco said in a statement.

The two are accused of engaging in an increasingly common scam known as “pig butchering,” which involves scammers building up a trusting relationship with victims before persuading them into investing in fraudulent cryptocurrency investments. Scammers then cut off communication with the victims and run away with their investment money. Criminals involved in this type of scam use dating apps and social media sites to search for victims.

Scheme

The two defendants alleged to have managed an international syndicate, instructing co-conspirators to open U.S. accounts in the names of dozens of shell companies, according to the DOJ. The companies’ “sole apparent purpose” was to facilitate the laundering of fraud proceeds, the department said.

According to the indictment, one of the shell companies was named “SMX Travel,” which had a principal address in Monterey Park, California. Another shell company, “Jimei Trading,” had a principal address in San Gabriel, California.

Once the victims deposited the money into the accounts, the money would be sent to bank accounts in the Bahamas and converted into Tether, a cryptocurrency pegged to the U.S. dollar, and then deposited into virtual assets valets, according to the DOJ. One of the wallets controlled by the defendants received more than $341 million.

“As alleged in the indictment, Li and Zhang helped launder millions of dollars obtained from victims of cryptocurrency investment scams,” Acting Assistant Attorney General Nicole Argentieri said in a statement. “Money laundering is critical to the success of these scams, allowing fraudsters to quickly move illicit proceeds and try to make them appear legitimate.

The indictment said one of the co-conspirators was a U.S. citizen living in Los Angeles. Another co-conspirator was a citizen of China who lived in many cities in the United States, including Los Angeles, New York, and Miami.

The defendants started their scheme from about August 2021 to April this year.

“Communications revealed extensive coordination to facilitate the international money laundering, including chats discussing the commission structure for the network, various shell companies used, victim information, and at least one video from a conspirator calling a U.S. financial institution,” the statement reads.

The arrests were made with the assistance of U.S. partners, Ms. Monaco said, which reflected the DOJ’s “ongoing commitment to disrupting the entire cybercrime ecosystem and stopping fraud across all financial markets.”

Mr. Li and Mr. Zhang were charged with conspiracy to commit money laundering and six substantive counts of international money laundering, according to the DOJ. If convicted, they face a maximum sentence of 20 years in prison on each count.

“Sophisticated financial scams such as these are a dangerous threat to the financial wellbeing of all Americans,” U.S. Attorney Martin Estrada for the Central District of California said in a statement. “I encourage everyone to educate themselves on pig butchering and other kinds of financial fraud to protect their families against such predatory activity.”

Warning

Last month, Iowa Attorney General Brenna Bird issued a statement warning Iowans of a rise of “pig butchering” scams.

“Pig-butchering scams are evil long-cons,” Ms. Bird stated. “Scammers prey on Iowans’ emotions to build trust over time before stealing their savings, ruining relationships, and taking advantage of people when they are at their most vulnerable. We are spreading the word to stop the scam.”

Ms. Bird raised a recent example, a 69-year-old man who was befriended by a scammer posing as a young woman named Delia on Facebook. The woman eventually convinced the man to spend $164,000 through bitcoin for an investment.

The attorney general offered several tips on how residents should protect themselves, including being wary of connecting with strangers online and not sending money through cryptocurrency. “Once that money is gone, you cannot get it back,” Ms. Bird stated.