Top Crypto Trader on Trial in China Over Online Gambling Cash Laundromat

Posted on: May 13, 2021, 04:22h. 

Last updated on: July 19, 2021, 01:06h.

Philip Conneller @casinoorgphilc Read More

Expertise: Gaming Business, Regulation, Tribal Gaming.

One of China’s most prominent crypto traders went on trial in the city of Hangzhou this week. He is accused of “assisting internet criminal activities” for his alleged role in the laundering of billions of dollars linked to online gambling and other criminal activities.

Zhao Dong is the head of over-the-counter (OTC) crypto-lending platform RenrenBit, and has long been a key figure in the Chinese crypto community.

He was detained by police in late May last year, at a time when Chinese authorities began clamping down on bitcoin and altcoin miners. Beijing has vowed to block all domestic and foreign cryptocurrency exchanges and ICO websites.

According to The Block Crypto, prosecutors accuse Zhao of being a “transactional counterparty” for an operation based in Hangzhou that used a “Paofen platform” to wash dirty money.

Day Day Up

Paofen literally means “points-scoring,” and denotes an app where users can earn rewards, along with bonuses, for signing up friends.

The Hangzhou operation created a Paofen platform where users signed up by sharing details of their bank accounts, as well as any mobile payment platforms popular in China, like AliPay or WeChat Pay.

Criminals could then use these pooled accounts to send and receive transactions, shuffling and reshuffling payments until money was almost impossible to trace.

Hangzhou police arrested 85 people in May 2020, along with Zhao, in relation to the case.

This included the team that created the platform, which was named “Day Day Up” – ironically, after a popular Chinese talk show that aims to promote traditional virtues and etiquette.

In late 2019, the operation upgraded to shuffling transactions through cryptocurrency, specifically Tether, which is likely where Zhao came in, although his exact role in the scheme has not been made public.

According to Xinhua, Day Day Up helped to launder money related to 1,900 cases of online gambling and telecommunication fraud. In the process, 30 billion yuan ($4.6 billion) of proceeds were sent overseas.

‘Harmful to Society’

China has been waging a war against cross-border gambling in recent years. Its crackdown on cryptocurrency is part of the same battle, an attempt to eliminate the money laundering channels that facilitate capital flight so it can maintain control over its international balance sheet, exchange rate, and foreign currency reserves.

The People’s Bank of China has begun trialing its own cryptocurrency, which Beijing hopes will make it easier to control capital flows.

“Compared with traditional underground banks, the ‘Day Day Up’ platform incorporates blockchain technology and uses virtual currency with an anchor price as a money laundering channel, which is more concealed and more harmful to the society,” a Hangzhou police spokesman reportedly told Xinhua.