Hong Kong Authorities Bust Four in Alleged $155M Cryptocurrency Laundering Scheme

News / 16.07.2021

In operation known as “Coin Breaker,” the Hong Kong authorities arrested four men in a suspected cryptocurrency laundering scheme worth $155 million (HK$1.2 billion). According to the South China Morning Post, these men aged between 24-36 years have been in operation from February 2020 to May 2021.

How they Managed the Scheme

The authorities believe that the syndicate operated in various bank accounts where they made transactions through virtual currency exchanges. According to the Syndicates Crime Investigation Bureau of Custom Head, Mark Woo, the cryptocurrency involved was Tether. However, in a telegram interview, the General Counsel for Tether, Stuart Hoegner, noted that his company did not issue the “privacy coins.”

After searching around five premises, the authorities concluded that around HK $880 million of the amount involved was traded in around 40 e-wallets. The authorities also noted that around 60 percent of the illegal funds had been channeled through Singapore bank accounts for 15 months.

The Hong Kong authorities are yet to name the trading platforms or the banks involved in the scheme.

Hong Kong Penalty for Money Laundering

Although this is the first time for Hong Kong to detect a money-laundering scheme involving cryptocurrencies, regulations against the vice have always been in place. According to the law; Under section 25(1) of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405 and section 25(1) of the Organized and Serious Crimes Ordinance, Cap 455

Money laundering is an offense for a person who, knowing or having reasonable grounds to believe that any property which, in whole or part, directly or indirectly represents any person’s proceeds of drug trafficking or indictable offense, deals with that property.

The maximum penalty is a HK$ 5,000,000 fine and 14-year imprisonment.

Mitigation Measure

The authorities have come up with a strategy to mitigate cryptocurrency money laundering schemes. First, they require every platform to register with a local watchdog, ensuring all the platforms are subject to anti-money laundering schemes and counter-terrorist financing rules.

According to government reports in May 2021, the rules can only serve professional investors, not retail traders.

Elsewhere, Law Enforcement is Making Headway 

Recently, British law enforcement seized around $250 million of cryptocurrency suspected of criminal activities. In China, authorities arrested more than 1000 people for using laundered money to buy cryptocurrency. The Chinese government also banned Cryptocurrency mining and has warned banks to stop crypto-related transactions. 

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Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.