Hong Kong officials have swooped on what appears to be a cryptocurrency money laundering scheme that may involve as much as HK$1.2 billion (US$155 million), in what could be the city’s first virtual currency money laundering case.
The Hong Kong Customs and Excise Department said today in a statement that it had mounted an operation on July 8 codenamed “Coin Breaker” to raid a suspected money laundering syndicate it had identified earlier this year.
Officers arrested four men aged between 24 and 33 who were suspected of involvement in the case and conspiring to “deal with property known or reasonably believed to represent proceeds of an indictable offence,” — otherwise known as money laundering — according to the statement.
The four suspects had opened accounts at several banks in Hong Kong and “had made transactions through a virtual currency exchange trading platform,” the department said in its statement, without naming the banks or the platform involved.
Between February 2020 and May this year, about US$1.2 billion of suspicious funds involving bank remittances and a virtual currency were processed, according to the statement. Mark Woo, head of the department’s syndicate crimes investigation bureau, confirmed at a media briefing that the virtual currency involved was the stablecoin Tether, according to a report by Bloomberg.
More than 60% of the suspicious funds were funneled through bank accounts in Singapore, and the Hong Kong authorities plan to seek help from Singaporean law enforcers, Woo said, as reported by the South China Morning Post.
The four men arrested have been released on bail, pending further investigation, the department said. The maximum penalty upon conviction would be a fine of HK$5 million and a 14-year prison sentence, according to the statement.
Hong Kong is not the only place that has seen a growing number of crimes related to crypto. Earlier this week, police in London announced that they had seized a record £294 million (US$408 million) in cryptocurrency in less than a month, as part of an ongoing money laundering investigation.
Meanwhile, in South Korea, police said in May that they had arrested 14 individuals in a crypto fraud case estimated to have cost 69,000 investors a total of US$3.85 billion, taking the country’s losses in crypto scams to US$5 billion over the past five years.
South Korean authorities have also said that banks would not be reprimanded in money laundering cases involving crypto exchanges, but that they would be blamed if they failed to report potential money laundering leads they happened to become aware of.
In the U.S., crypto-related crimes increased by an average of 300% every year from 2017 to 2020, according to a recent study by Crypto Head, a data aggregation site. The study also found that crypto crimes were on the rise in Australia and the UK, although not by as much. The vast majority of crypto crimes in the three countries involved Bitcoin, while Ethereum’s Ether was the second most common, the study showed.
In a separate report published in May, the U.S. Federal Trade Commission estimated that American consumers lost a collective US$80 million to cryptocurrency-related scams between October 2020 and May 2021 alone. There were almost 7,000 individual cases over the period, with a median rate of losses to individuals of US$1,900, according to the report.
Lachlan Keller and Danny Park contributed to this report.