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U.S. authorities have made progress in combating cryptocurrency scams with the recent arrest of two Chinese nationals, Daren Li and Yicheng Zhang.

The pair is accused of orchestrating a money laundering scheme that funneled over $73 million through U.S. financial institutions and ultimately converted the funds into Tether’s USDT token.

OEIS Financial Fraud Private Investigator: TLDR

• U.S. authorities arrested two Chinese nationals, Daren Li and Yicheng Zhang, in a cryptocurrency scam that laundered at least $73 million from defrauded victims.
• The defendants allegedly instructed co-conspirators to open U.S. bank accounts in the name of shell companies, which were used to launder the illicit funds.
• The scammers convinced victims to transfer millions of dollars into these U.S. bank accounts, and the money was then dispersed to various domestic and international bank accounts.
• The fraud scheme involved more than $73 million laundered through U.S. financial institutions to bank accounts in the Bahamas and converted to the virtual asset USDT (Tether).
• If found guilty, Li and Zhang could receive a maximum sentence of 20 years imprisonment for each count of money laundering, potentially totaling 140 years behind bars.

The U.S. Justice Department announced the arrests on Friday, May 17, revealing that Li was apprehended at Atlanta’s airport on April 12, while Zhang was taken into custody in Los Angeles on May 16.

An indictment unsealed in a California court on the same day shed light on their alleged roles in the scheme.

According to the indictment, Li, Zhang, and their accomplices operated a transnational criminal network that laundered millions from “pig butchering” crypto scams.

In these scams, fraudsters gain the trust of their victims, persuade them to invest substantial amounts of money, and then vanish with the funds.

The defendants allegedly directed their co-conspirators to establish U.S. bank accounts under the guise of shell companies, which served as conduits for laundering the illicit proceeds.

The scammers employed sophisticated tactics to deceive their victims, convincing them to transfer millions of dollars into the U.S. bank accounts under their control.

Once the funds were received, the money was dispersed to various domestic and international bank accounts in an effort to conceal its origins and evade detection by law enforcement.

The scale of the fraud scheme is staggering, with more than $73 million laundered through U.S. financial institutions and subsequently transferred to bank accounts in the Bahamas.

The illicit funds were then converted into the virtual asset USDT, or Tether, a popular stablecoin pegged to the value of the U.S. dollar. Investigators discovered that a cryptocurrency wallet associated with the scheme had received more than $341 million in virtual assets, highlighting the extensive reach of the criminal network.

Li and Zhang now face charges of conspiring to launder money and six counts of international money laundering.

If convicted, they could be sentenced to a maximum of 20 years in prison for each count, potentially resulting in a cumulative sentence of 140 years behind bars.

The arrests of Li and Zhang underscore the growing threat posed by cryptocurrency scams and the urgency of addressing this issue. Pig butchering scams, in particular, have become increasingly lucrative for online criminals, with the U.S. Department of Justice seizing $9 million from a similar scheme that targeted more than 70 U.S. citizens in November 2023.

As the frequency and severity of these scams continue to escalate, lawmakers and regulators have intensified their efforts to curb crypto-related crimes.

Proposed regulations and industry guidelines have been introduced to protect investors and safeguard digital assets.

What is a Pig Butchering Scam?

A pig butchering scam is a sinister type of online investment fraud that combines elements of romance scams and Ponzi schemes to fleece victims out of their savings. The term “pig butchering” refers to how the scammers “fatten up” their targets by building trust over time before eventually “slaughtering” them and making off with their money.

The scam typically begins when a victim is contacted out of the blue on social media or a dating app by an attractive stranger.

The scammer will strike up a friendly conversation and over weeks or months will develop a relationship with the target, often feigning romantic interest.

Once trust is established, the fraudster will casually bring up a “lucrative investment opportunity”, usually involving cryptocurrency, foreign exchange, or some other alternative asset.

The scammer, pretending to be a savvy investor, will guide the victim through setting up an account on a fake trading platform and making an initial deposit.

The victim will then be encouraged to invest more and more money as the scammer points to manipulated data showing huge returns. Fraudsters are skilled at exploiting their victims’ emotions and insecurities to keep them on the hook.

Scammers often operate as part of larger criminal syndicates and may force human trafficking victims in Southeast Asia to carry out the schemes against their will.

Fake personas are carefully crafted using stolen photos and invented backstories. Scammers target a broad range of victims but focus on the most lucrative “whales” – often professionals in their 30s to 50s with substantial savings.

When victims try to cash out their “earnings”, they’re told they must first pay exorbitant fees and taxes.

If they pay, new roadblocks emerge. Once victims are sucked dry or wise up to the con, the scammer disappears, the platform goes offline, and the funds vanish into fraudsters’ crypto wallets.

Losses can be devastating, ranging from thousands to millions per victim. Many are too ashamed to report being scammed.

To avoid pig butchering scams, be extremely wary of unsolicited investment offers, especially from someone you only know online.

Never share financial information with unverified individuals and always carefully research any investment opportunity. Beware of anyone trying to isolate you from family and friends.

With losses in the billions and scammers growing bolder, spreading awareness is critical to combating this rising threat.