Authorities in Sichuan province have effectively disrupted a significant underground banking operation linked to smuggling activities valued at 13.8 billion yuan, approximately $1.9 billion. As reported by local news outlets, the illicit network was involved in a range of illegal endeavors, leveraging Tether's stablecoin USDT to aid in the smuggling of pharmaceuticals, cosmetics, and the acquisition of prohibited items from overseas.
This crackdown aligns with China's nationwide commemoration of "May 15" Publicity Day for Combating and Preventing Economic Crimes.
The Negative Aspects of Sichuan's GDP
The police presented two notable instances during the gathering at the Chengdu Tianfu International Financial Center. One of the cases included a smuggling network operating in the Sichuan province under the guise of a bank.
Before China outlawed cryptocurrencies altogether in 2021, Sichuan was known for housing the biggest Bitcoin mining operations. According to the investigation, the offenders circumvented foreign exchange laws by using the USDT stablecoin, which opened up illegal channels for settlements of foreign exchange across 26 Chinese provinces, municipalities, and autonomous territories.
The criminals also provided services to clients requiring overseas fund transfers using USDT. Furthermore, the underground banking operation deceitfully obtained a tax refund from the government through falsified reports. These unlawful actions led to a rise in criminal activity across China, encompassing financial fraud, employment-related offenses, violations of drug regulations, smuggling of banned goods, and manipulation of credit card systems.
As per the report, these activities have caused considerable societal damage, greatly disrupting market and financial regulatory structures. The network operated from 2021 to 2023, initially establishing itself as an import and export enterprise.
196 People Are Arrested by Police as Suspects in the Crime
As a result of these crimes, police have arrested 193 people nationally, including in Shanghai, Changsha, Nanjing, Shenzhen, Fuzhou, and Jinhua. The ring leaders Lin, Weng, Chen, and other unidentified persons are among the detained suspects.
With the help of a combined task force comprising various Chinese law enforcement organizations like the Economic Investigation Corps of the Sichuan Provincial Public Security Department and the Ministry of Public Security's Economic Investigation Bureau, the arrests were made last year.
Authorities seized 149 million yuan from the suspects during the arrest process, along with bank cards, U-shields, and other payment devices that were used to support the illegal activities.
The matter was moved to the Chengdu Municipal People's Procuratorate in November of last year so that it might be examined and prosecuted.
Exposure of Tax Fraud
Tax fraud was the subject of the second case discussed at the event. The thieves stole over 137 million yuan in tax return money by using fake invoices to trick the government.
When police started looking into the plot in 2022, they discovered that the gang, which was headed by Zhao Mouwei and Zhao Moutao, used a number of businesses that were under their authority to conduct business, including import-export trading companies, biotechnology firms, and firms that acquired raw materials.
These fronts were utilized to make up claims about export and processing operations. A total of 17,765 false value-added tax invoices totaling 1.908 billion yuan were issued by the criminals at all levels.
The gang also used underground banks to manipulate foreign exchange transactions, luring other businesses to act as export platforms and investors and securing over 137 million yuan in illegal export tax refunds. Since then, the majority of the tax fraud has been collected by the authorities, and last year, the offenders were taken into custody.
May 2024, Cryptoniteuae