- Chinese workers embezzled $ 20 million at Kuaishou and laundered it with Bitcoin, using the help of coin mixers.
- The fraudsters exploited the internal bonus systems and transferred money through shell companies.
- The court sentenced the ringleader, Feng, to more than 14 years in prison. It also fined and jailed the co-conspirators.
Eight Kuaishou employees, a Chinese short-video platform, were jailed after plotting a complex embezzlement and money laundering scheme worth around 20 million dollars. This plan included using the internal bonus systems and exchanging stolen company funds into Bitcoin via international crypto exchanges and coin mixing services. In Beijing, the Haidian District People’s Court sentenced the ringleader, Feng, and others to between three years and 14 years and six months imprisonment.
Hackers breached Kuaishou, a publicly traded company partly owned by the state and based in the Haidian District of Beijing, by abusing its internal reward mechanisms. The mastermind, Feng, took advantage of his control over vendor contracts and bonus distributions and made up false eligibility guidelines, and diverted money to bogus participants. The laundering was done with the help of his two external accomplices, Tang and Yang.
Inside the $20M Fraud and Laundering Operation
Feng was able to control the onboarding of service providers and the disbursement of rewards, which enabled the group to carry out the fraud for almost one year. They used fake documents and falsified policies to embezzle funds intended for growing the platform. Rather than paying the bonuses out, they channeled the stolen bonuses into a chain of shell companies established by Yang and others.
The stolen money, which was about 140 million yuan, was later transferred via a series of false accounts and exchanged into Bitcoins via eight foreign cryptocurrency exchanges. The group used coin mixers, technologies designed to confuse transaction records and prevent tracing. They created a complicated chain of laundering in the form of a closed-loop, keeping the origin and destination of money unknown. The wrongdoers then stealthily deposited some of the converted assets into company accounts under their supervision.
However, despite all these sophisticated attempts, forensic investigators managed to retrieve more than 90 Bitcoins in the course of the investigation, which indicates the increasing potential of blockchain forensics. Prosecutor Li Tao of the Haidian District Procuratorate revealed the scheme through careful analysis of data and tracking of transactions, demonstrating the value of using digital evidence to combat crypto-enabled crimes.
Legal Outcome and Broader Implications
The court sentenced Feng to 14 years and six months in prison, while it gave the other seven fellow conspirators prison terms ranging from three to 14 years, along with financial penalties. They were all found guilty as per the Chinese law on occupational embezzlement.
