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The perpetrator of the widely reported single largest seizure of cryptocurrency that has been misappropriated, which is believed to be worth in the region of £5.5 billion, appeared before Southwark Crown Court, following an arduous seven-year investigation by the Metropolitan Police's Economic Crime team. Zhimin Qian (also known as Yadi Zhang) pleaded guilty to acquiring and possessing criminal property and attempting to lauder cryptocurrency resulting from an extensive large-scale fraud which is believed to involve 128,000 victims.
It has been long recognised that there are significant risks of fraud when in trading cryptocurrency but the scale of this case demonstrates that there is an urgent need for regulation of this financial sector.
Robin Weyell, Deputy Chief Crown Prosecutor for the Crown Prosecution Service said:
"Bitcoin and other cryptocurrencies are increasingly being used by organised criminals to disguise and transfer assets, so that fraudsters may enjoy the benefits of their criminal conduct. This case, involving the largest cryptocurrency seizure in the UK, illustrates the scale of criminal proceeds available to those fraudsters.
Today's guilty plea by Zhimin Qian marks the culmination of many years of complex and detailed work by both the Metropolitan Police and the Crown Prosecution Service. The fact that the defendant pleaded guilty today is testament to the thoroughness of the investigation and prosecution.
The CPS will now work to ensure, through criminal confiscation and civil proceedings, that the criminal assets remain beyond the fraudsters' reach.
The CPS is committed to working closely with law enforcement and investigatory authorities, to bring to justice individuals and companies who engage in laundering criminal proceeds of a cryptocurrency fraud."
Action Fraud reports that the amount of money lost by investors to cryptocurrency fraudsters is expanding and that often the victims of fraud only realise that they have been defrauded only after the website has been deactivated and the suspects can no longer be contacted.
Joanna Bailey, head of the banking and financial fraud litigation department, commented "the risk of trading in the cryptomarket cannot be over emphasised to novice investors. Fraudsters are always very persuasive and are quick to adapt to changes in the markets. The successful arrest and conviction is a testament to the dogged diligence of the police". Joanna further pointed out "many victims of cryptocurrency fraud are reluctant to come forward as they believe that the chances of recovering their stolen funds is not strong. However, swift legal action has often proved to
be successful in recovering at least some of the money. It has to be recognised that doing absolutely nothing will certainly result in losing the funds put into the fraud."
Fraudsters use a number of tried and tested methods to defraud their targets. Below are just some of the ways that the fraudsters extract their victims' money:
Investment Scams
Fraudulent companies are set up that lure novice investors who are unaware of the rules surrounding investment schemes, and promise high returns on cryptocurrency investments that are non-existent. Fake websites are created and advertisements are created for social media often with fake celebrity endorsements.
Pump and Dump Schemes
The fraudsters create a crypto coin, a large quantity of which the fraudsters retain. They then market the coin, again aiming at novice investors. In the short term this creates an increase in price. Once the coin is at its peak the fraudsters flood the market and sell the crypto coin that they have retained, which causes the coin to crash and lose value. The investors then find that they are in possession of large quantities of a cryptocurrency that is entirely worthless.
Romance Fraud
The fraudsters develop and romantic relationship over the internet with their target and once they have gained their victim's trust they claim to need a large amount money for an emergency, present their victim with a "too good to miss" investment opportunity – of course does not exist and then vanish.
Cryptocurrencies and similar digital assets are not regulated in the same way as traditional financial investments. However, since the courts have decided that owever
crypto assets are property, injunctions and other legal weapons can be brought against those accused of cryptocurrency fraud or those holding stolen crypto currency, thus enabling victims to potentially recover their assets.
Detective Sergeant Isabella Grotto, who led the Met's investigation, commented"Today marks the result of years of painstaking work. When our team located Zhimin Qian, she had been evading justice for five years, and her arrest triggered a complex investigation requiring evidence from multiple jurisdictions and the careful review of thousands of documents.
I am immensely proud of the investigation team and our partners who have worked tirelessly on this case."
Giambrone and Partners have had considerable success, when taking legal action against fraudsters, in recovering at least some of our clients' stolen money. The successful legal action against Zhimin Qian (Yadi Zhang) demonstrates a determined effort by the Metropolitan Police to stamp out investment fraud.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
