$6B scam accused in court, China loophole for Hong Kong Bitcoin ETFs: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Chinese national accused of $5.94 billion scam in court

Yadi Zhang, a Chinese national alleged to have scammed over 130,000 Mainland China investors out of 43 billion Chinese Yuan ($5.94 billion) and then laundered the proceeds using Bitcoin, has been apprehended by UK authorities. 

During her appearance at Westminster Magistrates’ Court on April 20, Zhang indicated through a translator that she intended to plead not guilty to two charges of criminal possession of cryptocurrency. She was remanded in custody.

“There should be no rush to judgment in this case. Ms Zhang asserts that she is wholly innocent,” her lawyer, Roger Sahota of Berkeley Square Solicitors, told the Financial Times.

Previously, her assistant, Wen Jian, a 42-year-old fast food worker in East London, pleaded guilty to charges of money laundering. In 2018, London police seized over 61,000 Bitcoin, now worth $4.0 billion, in a home raid where two women were living at the time. 

Operating through the company “Blue Sky Grid,” Zhang allegedly orchestrated one of the biggest Ponzi schemes in Mainland China with over 130,000 victims. Local news reported at the time: 

“Blue Sky Grid was established in Tianjin in 2014. With slogans such as environmental protection development, smart elderly care, and Bitcoin mining, the company uses zero risk and high interest rebates as bait, and conducts product promotion meetings, develops brokers, and courses and trainings, sign investment agreements with the public, and absorb social funds”

When investors had earned “sufficient interest” and wanted to withdraw, however, things didn’t go well. 

In 2017, faced with an uptick in redemption requests, Zhang reportedly fled China, first purchasing a Myanmese passport in the name of “Nan Yin” and using the forged document to obtain a genuine St. Kitts and Nevis passport through the country’s citizenship-by-investment program. Zhang then used the Nevisian passport to flee to the UK. 

However, due to her lack of English skills and a disability from a previous accident, Zhang was unable to care for herself in the UK and needed an accomplice. Around this time, fast food worker Wen Jian, who was then sleeping in the basement of the East London restaurant where she worked, saw a caretaker job ad posted by Zhang and responded. 

The two women quickly began a mutually beneficial relationship. 

Using Jian’s UK identity, Zhang was allegedly able to open legitimate accounts at crypto exchanges and launder her investors’ capital by purchasing Bitcoin and cashing out to self-custody wallets. Meanwhile, Jian quickly adopted a lavish lifestyle, renting out a luxurious mansion in North London for 17,000 pounds ($21,277) per month. 

However, the saga came to an end after the two women attempted to purchase two historic manors in North London for a combined 36 million pounds ($45 million), but could not explain the source of the funds. This tipped off London police who became suspicious of money laundering. 

In 2018, UK police raided the home Zhang and Jian and discovered 48 electronic devices including laptops, phones, and USB sticks allegedly used to launder funds into Bitcoin. By 2021, forensic police manage to decipher the devices and gain access to 61,000 Bitcoin valued at $4 billion. The whereabouts of the remainder of the stolen funds are currently unknown. 

It is unlikely that Blue Sky Grid investors will ever get their money back. After the seizure, UK police have since applied for civil forfeiture of the Bitcoin, which means that if approved by courts, the stolen Bitcoin will be reverted to the UK government and auctioned. 

Chinese nationals barred from Hong Kong crypto ETFs 

Hong Kong regulators have made it clear that Mainland Chinese residents will not be able to access Hong Kong spot Bitcoin and Ethereum ETFs after their April 30 launch. 

“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,” the city’s Securities & Futures Commission said in a statement. 

There is one minor loophole however: The ban does not include Mainland Chinese residents who also have a temporary or permanent residence permit in Hong Kong. Interestingly, all three issuers of the Hong Kong spot crypto ETFs are Chinese off-shore asset managers, and their products are tradable in the Chinese Yuan. 

China’s anti-money laundering laws and Bitcoin ban, enacted in 2007 and 2021, respectively, prevent its citizens from accessing the ETF products in Hong Kong. In recent years, Chinese nationals have increasingly used cryptocurrencies as a means of online gambling, transferring wealth abroad, and laundering proceeds of crime.

Philippines SEC cracks down on Binance

The Philippines Securities and Exchange Commission (SEC) has called upon tech giants Google and Apple to remove crypto exchange Binance’s apps from the country. 

The latest move follows warnings issued by the local SEC in November 2023 and a request to block access to Binance’s website earlier this year. “The SEC has identified [Binance] and concluded that the public’s continued access to these websites/apps poses a threat to the security of the funds of investing Filipinos,” said SEC Chairperson Emilio B. Aquino. 

Authorities have alleged that Binance offered unregistered securities and operated an unlicensed exchange within the country. The SEC had previously advised Filipino investors to withdraw their funds from Binance and instead engage with licensed service providers. 

Binance is currently the largest crypto exchange in the world, with a daily trading volume of $65 billion, covering more than 402 cryptocurrencies and 183 million users. According to the Philippines SEC, users won’t be guaranteed to be able to withdraw funds from the exchange after Binance is blocked by internet service providers (ISP) in the country, likely within three months’ time. 

Busy week for burgeoning Bitcoin DApp 

Bitcoin DeFi developer MicrovisionChain (MVC), based in Singapore and Macau, has launched its first asset bridge as part of its efforts to build a fully functional BRC-20 DEX that supports swaps and token exchanges. 

“The asset bridge addresses the issue of transaction congestion within the Bitcoin ecosystem, which includes BRC20 tokens, Runes, and other assets,” said Jason Kwok, COO and co-founder of MVC. “We are actively planning to collaborate with renowned custodial institutions and execute strategic campaigns to achieve higher Total Value Locked targets.”

The asset bridge allows users to swap Bitcoin and BRC-20 assets, with low price impact and instant transaction settlement times using an L2. To perform the swap, users must first wrap their Bitcoin so it is DeFi-accessible. The target asset can then be unwrapped for the respective native tokens post-swap completion. 

Blockchain security firm CertiK has since completed an audit of the MVC asset bridge. Moving forward, MVC plans to enact a Proof of Build model to incentivize ecosystem developers to build asset bridges, Bitcoin DEXs, wallets, and support for BRC-20 assets on the protocol. Under the proposal, 65% of its native SPACE token would be distributed to builds according to their respective contribution. The project currently has a diluted market cap of $300 million.  

Singaporean crypto exchange offers $100M to Titan Chain devs

Singaporean crypto exchange Tokenize Xchange will pledge $100 million worth of its TKX tokens to incentivize developers to build on its native blockchain. 

Dubbed “Titan Chain,” the project integrates interchain communications protocol Cosmos’ software development kit and compatibility with the Ethereum Virtual Machine. “The architecture of Titan Chain includes reduced transaction costs, increased scalability, better energy efficiency, and a customizable, developer-friendly environment,” wrote Tokenize Xchange staff. 

The firm will also migrate its TKX token, previously minted as an ERC-20 asset, onto Titan Chain starting April 19. Since its launch in 2020, the exchange’s token has returned nearly 1,000% and has a fully diluted market cap of $1.3 billion. The exchange was established in 2017 with over 350,000 active users. 

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Zhiyuan Sun

Zhiyuan Sun is a journalist at Cointelegraph focusing on technology-related news. He has several years of experience writing for major financial media outlets such as The Motley Fool, Nasdaq.com and Seeking Alpha.