Prosecutors arrested three people on Thursday for allegedly stealing over $10 million from banks and financial institutions, which they then converted to crypto and moved onto foreign crypto exchanges.
Zhong Shi Gao, 31, Naifeng Xu, 37, and Fei Jiang, 41, were arrested and charged with one count of bank fraud conspiracy, one count of conspiracy to commit wire fraud affecting a financial institution, one count of money laundering conspiracy and one count of aggravated identity theft, according to the U.S. Attorney’s Office for the Southern District of New York. The charges, if taken together, carry a maximum sentence of 82 years.
“These charges should serve as a warning to fraudsters and cybercriminals who think they can turn to cryptocurrency to hide their identities – together with our partner agencies, we will find you and hold you accountable for your crimes,” said U.S. Attorney Damian Williams in a statement on Thursday.
From 2018 to around 2022, the three recruited other people, mostly individuals from China and Taiwan temporarily living in the U.S., to open bank accounts at bank branches throughout New York City and other places. Control over those bank accounts would then be given to Gao, Xu and Jiang, prosecutors said.
The three people and others involved in the scheme then arranged for the funds to be deposited and transferred between bank accounts controlled by people connected to the scheme. Then Gao, Xu, Jiang and others “would cause fraudulent reports to be filed with the banks claiming that these wire transfers were unauthorized,” prosecutors said.
“This prompted the banks — both the bank issuing the wire transfer and the bank receiving the wire transfer — to temporarily credit the accounts in the amount of the transferred funds, effectively doubling the amount of money initially deposited into these accounts, even though Gao, Xu, Jiang, and other members of the scheme had in fact authorized the transfers and maintained control over the transferred funds all along,” the U.S. Attorney’s office said.
Afterwards, they would organize those funds to be withdrawn quickly as cash or into crypto and moved onto foreign crypto exchanges before the banks realized the reports were fake. Then the three and others involved could withdraw almost double the money that was initially deposited, prosecutors said.
“Schemes like this harm institutions and make it tougher to report suspicious transfers. The arrests today serve as a warning to anyone thinking of attempting to engage in bank fraud,” said FBI Assistant Director in Charge James Smith in a statement. “The FBI will hold you accountable in the criminal justice system.”
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