Three men have been arrested for an elaborate conspiracy that drained $10 million from banks across the New York City metropolitan area, United States Attorney for the Southern District of New York, Damian Williams, announced today.
“For years, Zhong Shi Gao, Naifeng Xu, and Fei Jiang allegedly participated in a complex scheme to steal over $10 million from nearly a dozen U.S. banks and financial institutions, which they converted into cryptocurrency and moved to foreign cryptocurrency exchanges,” said Williams.
How it happened
According to a release by the U.S. Attorney’s Office of the Southern District of New York, Gao, Jiang, and Xu recruited a number of Chinese and Taiwanese foreign nationals residing in the U.S. to open bank accounts across the New York City Metropolitan area.
The trio then took control of these accounts where they would arrange a string of transfers and deposits before ultimately making fraudulent reports that they were unauthorized.
From there, the banks proceeded “to temporarily credit the accounts in the amount of the transferred funds, effectively doubling the amount of money initially deposited into these accounts,” stated the report.
The defendants would then swiftly withdraw the credited funds in cash or cryptocurrency that would be placed on foreign exchanges before the banks could discover that their original reports were fraudulent.
Gao, Jiang, and Xu are facing four counts each, including bank fraud conspiracy, conspiracy to commit wire fraud, money laundering conspiracy, and aggravated identity theft.
U.S. District Judge Colleen McMahon has been assigned to the case. The total maximum sentence each defendant could face is 82 years in prison, though the Judge’s discretion will ultimately decide the duration of their time in prison.
“Schemes like this harm institutions and make it tougher to report suspicious transfers,” said FBI Assistant Director in Charge James Smith. “The FBI will hold you accountable in the criminal justice system.”
Legal crackdown on crypto
Gao, Jiang, and Xu’s arrests come amidst a broader legal crackdown on fraud in the cryptocurrency sector as a whole.
“These charges should serve as a warning to fraudsters and cybercriminals who think they can turn to cryptocurrency to hide their identities – together with our partner agencies, we will find you and hold you accountable for your crimes,” stated Williams.
Williams’ statements echo ones he made at a press conference earlier this month, urging crypto fraudsters to “cut it out” following the trial and conviction of disgraced FTX founder, Sam Bankman-Fried.
“And if they don’t, I promise we’ll have enough handcuffs for all of them,” Williams said.