Legal Issues In Prosecuting Cross-Border Ransomware Payments Routed Through Chinese Exchanges
Case 1: Chen Mouzhi Bitcoin Laundering Case (Shanghai)
Facts:
Chen Mouzhi assisted her husband, who had committed fraud abroad, in transferring illicit funds.
She converted the funds into Bitcoin using domestic accounts and sent the wallet credentials to her husband overseas.
Court Findings:
The court held that she knowingly laundered criminal proceeds by converting them into cryptocurrency to move them abroad.
Her awareness of the criminal origin of funds was critical for establishing liability.
Sentence:
Convicted of money laundering, sentenced to 2 years in prison, and fined RMB 200,000.
Legal Significance:
Establishes that converting criminal proceeds into cryptocurrency for cross-border transfer constitutes money laundering under Chinese law.
Demonstrates tracing wallet addresses and transactions to real persons is sufficient to establish liability.
Case 2: Three Young Men Facilitating USDT Cross-Border Conversion
Facts:
Three individuals born after 1995 provided cross-border conversion services between USDT and RMB for clients, conducting hundreds of transactions worth approximately RMB 30 million.
Court Findings:
Their operations were classified as illegal foreign exchange business, since the USDT transactions functionally converted RMB to foreign currency or vice versa.
The “should-have-known” standard applied: they could not claim ignorance of the criminal nature of the activity.
Sentence:
The three were sentenced to varying prison terms (1.5 to 5 years) and fined.
Legal Significance:
Illustrates that providing crypto-to-RMB exchange services without a license is criminally punishable.
Directly relevant to ransomware flows that use stablecoins to bypass banking regulations.
Case 3: Large-Scale USDT Cross-Border Conversion Network
Facts:
A network of individuals used shell companies and domestic accounts to facilitate large-scale USDT transfers and conversions to RMB for foreign clients.
The total value exceeded tens of billions of RMB over several years.
Court Findings:
Prosecutors classified their activity as illegal foreign exchange operation facilitated via virtual currency.
Evidence included blockchain transaction records, account flows, and company structures.
Sentence:
Senior operators received long prison terms; middle-level facilitators received shorter terms; fines were imposed.
Legal Significance:
Confirms that large-scale, structured cross-border cryptocurrency operations are treated as serious economic crimes.
Demonstrates the applicability to ransomware payments converted via stablecoins.
Case 4: Beijing USDT Laundering Case
Facts:
An individual sold USDT and facilitated transactions that were later linked to criminal proceeds.
Court Findings:
Even if the seller claimed ignorance, the court applied the “should-have-known” standard to convict him of concealing criminal property.
The pattern and volume of transactions demonstrated knowledge or recklessness.
Sentence:
Sentenced to 3 years and 6 months in prison.
Legal Significance:
Illustrates that intermediaries facilitating crypto transfers related to illicit funds can be criminally liable, even without direct involvement in the underlying crime.
Case 5: Illegal Stablecoin Conversion Gang
Facts:
A criminal network operated platforms that allowed users to convert RMB to USDT or other stablecoins and route payments internationally.
Court Findings:
Prosecutors classified this as illegal business operations using virtual currency as a medium.
Evidence included wallet addresses, transaction logs, and internal communications.
Sentence:
Key participants convicted of illegal business operation; auxiliary service providers were also prosecuted if they knowingly assisted the network.
Legal Significance:
Shows Chinese law treats stablecoin-based cross-border value transfer as a form of illegal financial operation.
Even indirect facilitators can be prosecuted if they know or should know the purpose of the transactions.
Case 6: Small-Scale USDT Laundering Case
Facts:
An individual conducted smaller USDT transactions, but authorities found the pattern consistent with laundering criminal proceeds.
Court Findings:
The court held that even low-value crypto transactions could constitute money laundering if linked to illicit activity.
Blockchain evidence and transaction patterns were key.
Sentence:
Sentenced to 6 months’ imprisonment (suspended) and fined.
Legal Significance:
Demonstrates that Chinese law prosecutes crypto laundering at all scales.
Reinforces that ransomware-related payments, even small ones, routed through Chinese wallets or exchanges, carry criminal liability.
Summary of Legal Principles from These Cases
Money laundering applies to crypto: Converting or transferring criminal proceeds via Bitcoin, USDT, or other crypto constitutes laundering.
Illegal foreign exchange business: Stablecoin cross-border conversion can be prosecuted under Chinese law even if no fiat currency is directly handled.
“Should-have-known” standard: Facilitators do not need to know the exact criminal origin; recklessness or willful blindness is sufficient.
Traceability is enforceable: Chinese courts accept blockchain and wallet evidence to link virtual currency to individuals.
Liability for intermediaries: Exchanges, OTC traders, or service providers aiding cross-border transfers may face severe penalties.
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