Three Arrested in Cryptocurrency Scheme

The U.S. Attorney’s Office for the Southern District of New York, in collaboration with the FBI, has announced the arrest of Zhong Shi Gao, Xu Nai Feng, and Fei Jiang in connection with a $10 million cryptocurrency scheme on 16 November.

Stolen Funds Converted into Cryptocurrency

The accused individuals are alleged to have masterminded a plan to siphon off millions from U.S. banks and financial institutions, converting the pilfered funds into cryptocurrency and relocating them to international crypto exchanges.

U.S. Attorney Damian Williams said:

"For years, Zhong Shi Gao, Naifeng Xu, and Fei Jiang allegedly participated in a complex scheme to steal over $10 million from nearly a dozen U.S. banks and financial institutions, which they converted into cryptocurrency and moved to foreign cryptocurrency exchanges. 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."

Specific details about the exchanges involved have not been disclosed.

To execute the plan, the accused allegedly manipulated transactions between controlled accounts, falsely reporting them as unauthorised.

This led to the banks crediting the accounts with the supposed stolen amount, effectively doubling some balances.

Trio Global Network

The trio enlisted accomplices, particularly foreign nationals from China and Taiwan temporarily residing in the United States.

The scheme unfolded between 2018 and 2022, targeting bank branches in New York City’s metropolitan area and other locations.

Facing charges that could result in up to 80 years in prison, each individual is also charged with aggravated identity theft, carrying a mandatory two-year prison sentence.

As stated in the press release:

"ZHONG SHI GAO, 31, of Flushing, New York; NAIFENG XU, 37, of Guthrie, Oklahoma; and FEI JIANG, 41, of Brooklyn, New York, are each charged with one count of bank fraud conspiracy, which carries a maximum sentence of 30 years in prison; one count of conspiracy to commit wire fraud affecting a financial institution, which carries a maximum sentence of 30 years in prison; one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison to be served consecutively to any other sentence imposed."

U.S. Government Crackdown on Crypto Fraud

U.S. authorities are intensifying efforts to combat cryptocurrency-related crimes, aiming to safeguard the financial system.

Recent successes include the conviction of FTX founder Sam Bankman-Fried and the arrest of six individuals involved in a multi-million dollar crypto money laundering scheme in October.

In August, Bitfinex hackers Heather Morgan and Ilya Lichtenstein pleaded guilty to money laundering charges.