Chinese law enforcement targets web3 sector amid rising cases of cybercrime and identity theft
Chinese law enforcement has heightened its supervision of the web3 industry in cases of personal identity theft and digital financial crimes.
Highlights
- Chinese authorities arrest 515 individuals in 79 deepfake fraud cases
- Authorities arrest 21 individuals linked to a 54.8 million USDT money laundering scheme
In response to a surge in instances of personal identity theft and digital financial crimes, Chinese law enforcement has escalated its oversight of the web3 sector.
However cryptocurrency and crypto mining are banned in the nation. The Ministry of Public Security in China held a press conference on 10 August during which Jinfeng Sun, the political commissar of the Network Security Bureau, highlighted a series of incidents involving cyber attacks and fraudulent activities.
These incidents encompassed the use of Trojan viruses, phishing websites, infiltration tools, and cyber stalking methods to carry out data theft and various forms of fraud.
“[We have been] monitoring [the use of] Chat GPT, cloud computing, blockchain, deepfake AI and other new emerging technologies, new applications, new organizations [in these incidents]. We [the Ministry] will strike hard at such methods as we research their use.
Money-laundering bust
Of particular concern, Sun unveiled that there had been a staggering 79 cases of fraud that exploited deep fake AI technology.
This advanced technique involved leveraging digital face-swapping to impersonate individuals, resulting in the arrest of 515 individuals engaged in such activities.
Additionally, recent actions by Chinese law enforcement led to the apprehension of 21 individuals in Shanxi Province.
These individuals were allegedly linked to a substantial money laundering operation involving 54.8 million USDT. The scheme reportedly revolved around purchasing USDT at prices lower than the market rate from Chinese citizens, only to sell these digital assets at overseas exchanges for fiat currency.
The profits from these transactions were pocketed, while the clients' funds were transferred abroad. It's important to note that China has stringent regulations governing capital outflows, restricting Chinese nationals from purchasing more than $50,000 worth of foreign currencies annually.
Cryptocurrency project's CEO arrest sparks controversy
Despite these rigorous capital controls, there have been allegations against Chinese law enforcement for misappropriating funds from cryptocurrency projects through their enforcement measures.
Notably, Multichain, a cross-chain protocol, suffered a substantial setback when its CEO, Zhaojun He, was arrested.
The circumstances surrounding He's detention remain undisclosed, while funds belonging to both developers and users of Multichain were converted into stablecoins and privacy coins, subsequently transferred out of the exchange.
