Feds bust $73M crypto scam, arrest two masterminds

United States authorities arrested two individuals accused of masterminding a money laundering scheme, which involved funneling over $73 million through U.S. financial institutions and ultimately converting the funds into Tether (USDT).

The Justice Department announced on Friday that Daren Li, 41, was arrested at Atlanta’s airport on April 12, and Yicheng Zhang, 38, was taken into custody in Los Angeles on Thursday. An indictment charging the pair was unsealed in a California court on Thursday, revealing their alleged roles in the scheme.

Li, Zhang, and their cohorts allegedly ran a transnational criminal network that laundered millions from ‘pig butchering’ crypto scams, where fraudsters gain victims’ trust, convince them to invest large sums, and then disappear with the funds.

The defendants allegedly instructed co-conspirators to open U.S. bank accounts in the name of shell companies. The scammers convinced victims to transfer millions of dollars into these U.S. bank accounts, which were then used to launder the illicit funds.

According to the Department of Justice, the money was subsequently dispersed to various domestic and international bank accounts. The DOJ said,

“The fraud scheme involved more than $73 million laundered through U.S. financial institutions to bank accounts in the Bahamas and converted to the virtual asset USDT, or Tether. A cryptocurrency wallet involved in the scheme received more than $341 million in virtual assets.”

Daren Li and Yicheng Zhang face charges of conspiring to launder money and six counts of international money laundering. If found guilty, they could receive a maximum sentence of 20 years imprisonment for each count, potentially totaling 140 years behind bars.

Related: Tether freezes $5.2M in USDT linked to phishing scams

Deputy Attorney General Lisa Monaco, in a statement, acknowledged the challenges posed by cryptocurrency fraud but affirmed the commitment to hold perpetrators accountable.

Pig butchering scams have become lucrative for online criminals. In November 2023, the United States Justice Department seized $9 million from a scheme that preyed on more than 70 U.S. citizens. Due to its escalating frequency and severity, this type of scam has raised alarm bells among lawmakers and regulators in recent months.

Regulators have heightened efforts to curb crypto scams and related incidents in the market. This can be seen in proposed regulations and industry guidelines rolled out by authorities. While efforts are hailed to protect investors and preserve digital assets, some regulations could become a stumbling block to the sector’s development.

Magazine: U.S. enforcement agencies are turning up the heat on crypto-related crime