Beijing executives suspected of encryption money laundering sentenced to 14 and a half years! Embezzled 19.5 million USD of public funds to purchase coins, 90 Bitcoins confiscated.

The Beijing court handed down a heavy sentence on a former executive of a technology company, Feng, on Tuesday, for embezzling 140 million yuan (approximately 19.5 million USD) using his position, and laundering the illicit funds by converting them into Bitcoin and other Crypto Assets through eight overseas exchange platforms. He was ultimately sentenced to 14 years and 6 months in prison. The case was summarized by prosecutors as having three main characteristics: "small officials with huge greed, laundering through Virtual Money, and weak corporate risk control". During the investigation, Li Tao, a prosecutor from the High-Tech Crime Prosecutor's Office of Haidian District, successfully reconstructed the entire chain of embezzlement, transfer, laundering, and distribution of funds, recovering 90 "hidden" Bitcoins valued at over 11 million USD. This case highlights the rising trend of Money Laundering crimes using Crypto Assets in China, and despite strict policies prohibiting such activities, law enforcement agencies are actively using Blockchain tracing technology to combat these crimes and are cooperating with licensed exchanges in Hong Kong to handle the involved Crypto Assets.

[Executives collude with external parties to falsely cash out, eight platforms involved in coin money laundering] The executive involved, Feng, was previously responsible for approving incentive bonuses for a short video platform. According to the prosecution's charges, he colluded with external suppliers to transfer company funds into accounts under his control by submitting false applications. Subsequently, these funds were dispersed to eight overseas crypto assets exchanges, converted into Bitcoin and other digital assets, with the intention of concealing the source of the illicit funds.

[Prosecutors summarize three major characteristics, mixing coin technology cannot escape the law net] Li Tao, a prosecutor from the High-Tech Crime Prosecution Department of the Haidian District People's Procuratorate, pointed out to the People's Daily (report initially cited by the South China Morning Post) that this case has three typical characteristics: "small officials with huge corruption, virtual money laundering, and weak corporate risk awareness." To cover up the flow of funds, Feng and his accomplices used mixing technology—this technology obscures blockchain transaction traces by pooling and redistributing crypto assets. However, the investigating authorities successfully tracked the flow of funds and ultimately recovered over 90 Bitcoins (approximately 11 million USD at current prices). Dan Dadybayo, the head of research strategy at Unstopp Wallet, told Decrypt: "Mixing coins significantly increases the complexity of tracking funds, but does not guarantee complete anonymity." He explained that current Blockchain analysis tools are able to "utilize pattern recognition, statistical clustering, and temporal analysis" to "partially or even fully reconstruct the flow of funds" in many cases, with effectiveness depending on the "size of the anonymity set and the operational patterns of the involved actors."

【Electronic Forensics Breakthrough in Mixing Coin Maze, On-Chain Traceability Capability Upgrade】 The prosecution revealed that advanced electronic data review technology was used in this investigation, which detailed the entire process of funds from embezzlement, conversion to money laundering. Digital forensic methods successfully cracked the mixing operations and linked offshore exchange transactions with domestic bank accounts. Dadybayo cited cases from domestic security companies such as Salus Security, Beosin, and SlowMist, pointing out that Chinese law enforcement agencies are increasingly using blockchain analysis tools in cryptocurrency case investigations to enhance asset tracking and anti-money laundering enforcement capabilities.

【Seven-member gang sentenced, tech company corruption shifts to crypto money laundering】 Seven people, including Feng, have been sentenced for embezzlement, with prison terms ranging from three to fourteen years, along with fines. This case corroborates the conclusions of the white paper on commercial corruption in technology enterprises recently released by the Haidian District Procuratorate of Beijing—this report analyzed 1,253 cases from 2020 to 2024 and found that the corruption model is shifting from traditional bribery to Virtual Money fraud, with methods involving data abuse, shell companies, and Money Laundering. The report warns that areas such as e-commerce and artificial intelligence are high-risk zones due to weak regulation, and Feng's case is one of the ten typical cases.

[The disposal of involved crypto assets attracts attention, Hong Kong becomes a compliant monetization channel] Despite China's ban on cryptocurrency trading and the involvement of financial institutions, this case once again highlights the rising trend of using crypto assets for money laundering in China. It is noteworthy that authorities are exploring compliant disposal of the involved crypto assets through licensed exchanges in Hong Kong. Last month, the Beijing Municipal Public Security Bureau announced that it would work with the Beijing Property Exchange to liquidate the cryptocurrency seized from criminal cases through licensed exchanges in Hong Kong. Although the total amount of crypto assets held by various levels of government remains opaque, the market has already reached a scale— for example, the 195,000 Bitcoins seized by the police in Yancheng, Jiangsu in 2020 from a Ponzi scheme, which are valued at approximately $23.4 billion at current prices.

Conclusion: The case of Feng serves as a dual warning for technology companies regarding internal controls and the risks of money laundering through encryption. With the enhanced ability of the prosecution to "fully restore the flow of funds" and the establishment of compliance disposal channels in Hong Kong, China’s crackdown on cryptocurrency crimes is moving towards a closed-loop governance model of "technical penetration + asset disposal". This case also warns companies to strengthen supervision over high-risk positions, as mixing technology is by no means a "protective talisman" for money laundering. The evolution of blockchain tracing technology will continue to compress the space for criminal concealment. Investors must be vigilant about the legal risks posed by the influx of tainted coins into the market, and compliant exchanges should strengthen anti-money laundering risk control to cut off the chain of criminal funds.