Authorities Bust Massive $5.94B Crypto Scam, Chinese National Arrested

In the rapidly evolving East Asian fintech landscape, Chinese national Yadi Zhang faces fraud charges for orchestrating a massive $5.94 billion Ponzi scheme through Blue Sky Grid. Zhang allegedly laundered funds using Bitcoin and fled China with a forged St. Kitts and Nevis passport. Meanwhile, Hong Kong regulators prohibit mainland Chinese residents from accessing its spot Bitcoin and Ethereum ETFs, citing AML concerns and Bitcoin ban in China. Philippine SEC also cracks down on Binance, urging Apple and Google to remove its apps due to unregistered securities and unlicensed exchange operations.

Law Enforcement Uncovers Massive $5.94 Billion Crypto Scam, Chinese National Apprehended

In a groundbreaking development, UK authorities have detained Yadi Zhang, a Chinese national accused of orchestrating an astounding Ponzi scheme that defrauded over 130,000 investors in Mainland China, swindling a staggering 43 billion Chinese Yuan (approximately $5.94 billion). The elaborate scam reportedly involved laundering ill-gotten gains through Bitcoin transactions.

During her Westminster Magistrates' Court appearance on April 20, Zhang pleaded not guilty to two charges of criminal possession of cryptocurrency through a translator. She was remanded in custody pending further legal proceedings.

"It is essential to refrain from hasty judgments in this case," commented Roger Sahota, Zhang's lawyer, to the Financial Times. "Ms. Zhang maintains her innocence without reservation."

Previously, Wen Jian, Zhang's 42-year-old assistant, who worked as a fast food employee in East London, entered a guilty plea to money laundering charges. In 2018, London police conducted a raid on a residence where two women were residing, seizing a substantial cache of over 61,000 Bitcoin, valued at $4.0 billion.

Unraveling the Blue Sky Grid Ponzi Scheme

Zhang allegedly masterminded one of the largest Ponzi schemes in Mainland China through her company, "Blue Sky Grid," targeting over 130,000 victims. Local news sources at the time reported:

"Blue Sky Grid was established in Tianjin in 2014. With slogans such as environmental protection development, smart elderly care, and Bitcoin mining, the company used zero-risk and high-interest rebates as bait to conduct product promotion meetings. They developed brokers and offered courses and training, signing investment agreements with the public and absorbing social funds."

However, when investors sought withdrawals after accumulating "sufficient interest," the scheme unraveled.

In 2017, faced with a surge in redemption requests, Zhang reportedly fled China. She first acquired a Myanmese passport under the alias "Nan Yin" and then used the forged document to fraudulently obtain a genuine St. Kitts and Nevis passport through the country's citizenship-by-investment program. Zhang subsequently utilized the Nevisian passport to enter the UK.

Despite her St. Kitts and Nevis citizenship, Zhang's lack of English proficiency and disability from a past accident hindered her ability to navigate life in the UK independently. Around this time, Wen Jian, who was working as a fast food employee in East London and sleeping in the restaurant's basement, noticed a caretaker job posting by Zhang and applied for the role.

A Symbiotic Relationship and the Downfall of the Scheme

The two women swiftly formed a mutually beneficial alliance. Using Jian's UK identity, Zhang allegedly established legitimate accounts on crypto exchanges and laundered investors' capital by purchasing Bitcoin and withdrawing it to self-custody wallets. Meanwhile, Jian adopted a lavish lifestyle, renting a luxurious mansion in North London at a monthly cost of £17,000 ($21,277).

The elaborate scheme crumbled after the duo attempted to purchase two historic manors in North London for a combined £36 million ($45 million) but failed to provide a legitimate explanation for the source of the funds. London police were alerted and became suspicious of money laundering activities.

In 2018, police raided Zhang and Jian's residence and discovered 48 electronic devices, including laptops, phones, and USB sticks, allegedly used to launder funds into Bitcoin. By 2021, forensic police successfully deciphered the devices, gaining access to 61,000 Bitcoin valued at $4 billion. The whereabouts of the remaining stolen funds remain unknown.

Bleak Outlook for Blue Sky Grid Investors

The recovery of stolen funds by Blue Sky Grid investors appears unlikely. Following the seizure, UK police have filed an application for civil forfeiture of the Bitcoin, which, if approved by the courts, would result in the forfeiture of the stolen Bitcoin to the UK government for subsequent auction.

Hong Kong Restricts Crypto ETF Access for Chinese Nationals

Hong Kong regulators have declared that Mainland Chinese residents will be prohibited from accessing Hong Kong spot Bitcoin and Ethereum exchange-traded funds (ETFs) following their launch on April 30.

The Securities & Futures Commission (SFC) issued a statement emphasizing: "No matter the virtual asset futures ETFs currently on the Hong Kong market, or the virtual asset spot ETFs that will be issued in the future, they cannot be sold to retail investors in mainland China and other places where the sale of virtual asset-related products is prohibited."

However, a minor caveat exists, as the ban does not extend to Mainland Chinese residents holding a temporary or permanent residence permit in Hong Kong. Notably, all three issuers of Hong Kong spot crypto ETFs are Chinese offshore asset managers, and their products can be traded in the Chinese Yuan.

China's anti-money laundering laws, implemented in 2007, and Bitcoin ban, enacted in 2021, prevent its citizens from accessing ETF products in Hong Kong. In recent years, cryptocurrencies have gained popularity among Chinese nationals as a means of online gambling, wealth transfer abroad, and money laundering.

Philippines SEC Cracks Down on Binance

The Philippines Securities and Exchange Commission (SEC) has summoned technology giants Google and Apple to remove Binance's crypto exchange apps from its national app stores