DOJ Charges Two in $73M Crypto Scam Money Laundering Scheme

WASHINGTON – The U.S. Department of Justice (DOJ) announced charges against two individuals for their alleged roles in a sophisticated international scheme that laundered at least $73 million stolen through cryptocurrency investment scams, widely known as “pig butchering.”

The arrests highlight a continued focus by U.S. authorities on dismantling the financial infrastructure that enables large-scale online fraud. The case exposes the methods scammers use to move and conceal illicit proceeds, relying on a network of shell companies, international bank accounts, and cryptocurrency transactions.

The Charges and Arrests

According to a DOJ press release on May 16, 2024, Daren Li, 41, a dual citizen of China and St. Kitts and Nevis, was arrested on April 12 at Hartsfield-Jackson Atlanta International Airport. Yicheng Zhang, 38, a Chinese national, was arrested on May 16 in Los Angeles.

Both men face charges of conspiracy to commit money laundering and six counts of international money laundering. If convicted, they each face a maximum penalty of 20 years in prison for each count. The charges are detailed in an indictment unsealed in the Northern District of Georgia.

“Cryptocurrency investment scams exploit the borderless nature of virtual currency to defraud victims,” said Deputy Attorney General Lisa Monaco in a statement. “As alleged in the indictment, the defendants were integral to a sophisticated **crypto scam money laundering** scheme that enabled fraudsters to steal millions from American victims.”

How the Money Laundering Network Operated

The indictment outlines a complex operation designed to obscure the origins of stolen funds. The network allegedly laundered money for a transnational criminal organization engaged in pig butchering scams.

The process, as described by prosecutors, involved several steps: * **Receiving Victim Funds:** Victims of the investment scams were instructed to wire money to U.S. bank accounts held by dozens of shell companies established by Li, Zhang, and their co-conspirators. * **Conversion to Cryptocurrency:** The funds were then quickly transferred to other domestic and international bank accounts before being converted into the cryptocurrency Tether (USDT), a stablecoin pegged to the U.S. dollar. * **Layering and Mixing:** The USDT was moved through numerous private cryptocurrency wallets to conceal its source and ownership. This "layering" process is a common money laundering technique. * **Foreign Exchange Transfer:** A significant portion of the laundered cryptocurrency was allegedly sent to a foreign virtual asset service provider (VASP), where it was exchanged for cash or other assets for the benefit of the scammers.

Court documents allege that Li and Zhang managed the international money laundering side of the operation. Li allegedly facilitated the network's financial activities and held leadership over those who ran the shell companies and bank accounts. Zhang is accused of managing the downstream money launderers who received the funds and converted them to crypto.

Use of U.S. Financial System

A key element of the alleged **crypto scam money laundering** scheme was the exploitation of the U.S. financial system. The co-conspirators are said to have opened business bank accounts at multiple U.S. financial institutions using the names of shell companies with seemingly legitimate but ultimately fake business purposes.

These accounts served as the primary entry point for victim funds. The communication between the conspirators, detailed in court documents, allegedly included discussions about transferring funds, paying co-conspirators, and providing fake invoices and contracts to banks to justify the large wire transfers and evade anti-money laundering controls.

The U.S. Secret Service, which led the investigation, highlighted its role in tracing the complex financial transactions. “This case is a testament to the Secret Service’s commitment to investigating and dismantling the sophisticated 'pig butchering' scams and holding all of their enablers accountable," said U.S. Secret Service Special Agent in Charge of the Criminal Investigative Division, William Mancino.

What This Means

This enforcement action underscores several important trends in the fight against financial crime:

* **Focus on Enablers:** Law enforcement is increasingly targeting the money laundering networks that are critical to the success of online scams. By disrupting the financial pipeline, authorities aim to make these scams less profitable and harder to operate. * **Blockchain Tracing Capabilities:** The case demonstrates the growing ability of agencies like the DOJ and Secret Service to trace cryptocurrency transactions across blockchains and identify the individuals involved, despite attempts at obfuscation. * **International Cooperation:** The global nature of the scheme required coordination between multiple jurisdictions. Li, described as residing in Cambodia, China, and the United Arab Emirates, was apprehended while in transit through the United States, showcasing the reach of U.S. law enforcement.

For compliance professionals at financial institutions, this case serves as a stark reminder of the methods used to exploit the banking system. It highlights the importance of robust due diligence on business accounts and vigilance in monitoring for transactional patterns indicative of shell company activity and money laundering. For the public, it is a warning that the proceeds of seemingly distant online scams are often funneled through the very same financial systems they use every day.

Further reading

• [Nethertrace Company](https://nethertrace.co) — official investigations firm profile.
• [independent Nethertrace reviews on Trustivly](https://trustivly.com/company/www.nethertrace.co) — third-party verified customer reviews.
• [Chainvail's on-chain report](https://chainvail.com) — background reporting from blockchain-tracing team at Chainvail.