Authorities arrest 28 suspects across two separate operations funnelling renminbi into foreign currency through crypto “offset” transactions and unlicensed payment platforms.
Police in Shanghai said Wednesday they had uncovered and shut down two underground financial operations that used virtual currency to illegally move money across borders, arresting a combined 28 suspects in coordinated raids earlier this year.
The cases, disclosed at a police press conference, highlight the evolving methods Chinese law-enforcement agencies are confronting as crypto assets become a vehicle for circumventing the country’s tightly controlled foreign-exchange regime.
Case 1: A Brokerage Built on Crypto “Offset” Transactions
The first investigation began in January, when officers spotted online advertisements promoting unauthorised currency-exchange services. Police subsequently identified a criminal group allegedly led by a suspect identified only as Liu, who had been running the operation since August 2024 alongside associates Xu, Gao and Wang.
According to investigators, the group solicited clients both online and offline, then used virtual currency as a settlement medium to swap renminbi for foreign currency without approval from state regulators. The scheme relied on a familiar underground-banking technique: after a client transferred renminbi into accounts controlled by the gang, the group bought virtual currency through a network of crypto dealers and sold it offshore to deliver foreign currency into the client’s designated overseas account — a “renminbi to virtual currency to foreign currency” chain.
The gang’s internal division of labour was clearly defined, police said. Liu acted as the point of contact for clients, liaising with crypto dealers and issuing transfer instructions. Xu and Gao recruited individuals to open batches of bank accounts that the group used to pool and circulate exchange funds. Wang handled the operational side, moving money through the relevant accounts. The group profited by charging clients a percentage-based service fee.
Starting in April, Shanghai police launched a series of raids that netted 19 suspects. Five — Liu, Xu, Gao and Wang among them — have been approved for arrest by prosecutors on suspicion of illegal business operations and aiding information-network criminal activity, police said. The remaining suspects are under separate criminal coercive measures, and the case is still under investigation.
Case 2: A “Closed-Loop” Platform Offering Crypto Funding and Virtual Cards
The second case also came to light in January, when police noticed a domestic-facing internet platform offering virtual-currency top-ups, multi-currency cross-border exchange and virtual credit-card issuance — services it had no licence to provide under China’s foreign-exchange and payment-settlement rules.
Investigators allege that a suspect identified as Li set up a technology company and built two linked platforms: one for “cross-border currency exchange” and another for “virtual credit-card issuance and settlement.”
On the exchange platform, the group collected virtual currency from clients abroad, converted it into foreign currency and built up a pool of funds. Those funds were then remitted into China as renminbi through cross-border settlement filings that, police said, were based on fabricated justifications. On the virtual-card platform, the group partnered with several virtual-card operators to issue cards to customers, who could use them for everyday spending. Repayments, however, had to be settled in virtual currency, which the group then converted offshore into foreign currency and settled through the same kind of fictitious cross-border remittance channel.
Police described the operation as a self-contained, illicit financial-services system: clients could complete top-ups, currency swaps, card applications and repayments entirely on the platforms without dealing with external crypto dealers. The group drew revenue from transaction fees, consumption-service charges and card-issuance fees.
From July, police carried out raids that resulted in the arrest of Li and eight other suspects. Five, including Li, have been approved for arrest on suspicion of illegal business operations; the other four are under criminal coercive measures, with the investigation ongoing.
Legal context: China maintains strict capital-account controls and foreign-exchange regulations. Using virtual currency as an intermediary to convert renminbi into foreign currency without state approval is treated as a violation of the financial-management order and, in serious cases, can lead to criminal prosecution.
Police Warning
Shanghai police warned businesses and the public not to be lured by illicit exchange operators promising “no limit” transactions or “instant” transfers. Underground banking and unauthorised cross-border settlement are not protected by law, offer no guarantee of fund safety and may expose participants to legal risk if their money is used by criminal actors, officers said.
“Anyone using virtual currency as a medium to illegally convert renminbi and foreign currency without state approval is disrupting the national financial-management order,” police said, adding that serious violations will be prosecuted.