Two Chinese Nationals Arrested and Arraigned in the U.S. – What’s Going On?

The U.S. Attorney’s Office for the Central District of California announced that a grand jury indictment was unsealed, accusing two Chinese nationals of laundering at least $73 million through shell companies linked to cryptocurrency investment fraud. They have been arrested and arraigned.

Daren Li, 41, holds dual citizenship in China and St. Kitts and Nevis and resides in China, Cambodia, and the United Arab Emirates. He was arrested at Atlanta Hartsfield-Jackson International Airport on April 12 and was subsequently transferred to the Central District of California.

Yicheng Zhang, 38, a resident of Temple City, was arrested and arraigned in Los Angeles.

Both are charged with conspiracy to launder money and six counts of substantive international money laundering. If convicted, each charge carries a maximum sentence of 20 years in prison.

Zhang pleaded not guilty to the charges, and his trial is set for July 9. He remains in federal custody with a detention hearing scheduled for May 21. Li has been ordered detained without bail by a federal magistrate judge, with a hearing set for May 20.

U.S. Attorney Martin Estrada stated, “Such complex financial fraud schemes pose a dangerous threat to the financial well-being of all Americans.

While my office will continue to dismantle and punish these deceptive schemes, I encourage everyone to educate themselves about pig-butchering and other types of financial fraud to protect their families from such predatory activities. Vigilance is key.”

According to court documents, Zhang, Li, and other co-conspirators allegedly managed an international group that laundered proceeds from cryptocurrency investment fraud, also known as "pig-butchering" scams.

The victims were deceptively induced to transfer millions of dollars into U.S. bank accounts opened in the names of dozens of shell companies, whose only apparent purpose was to facilitate the laundering of fraudulent proceeds.

The launderers then transferred the funds to other domestic and international bank accounts and cryptocurrency platforms in ways designed to conceal the origin, nature, ownership, and control of the funds. The scheme involved laundering over $73 million through U.S. financial institutions to Bahamian bank accounts and converting the funds into USDT stablecoin.

One cryptocurrency wallet involved in the scheme received over $341 million in virtual assets.

Zhang and Li allegedly directed co-conspirators within the laundering network to open bank accounts in the names of various shell companies. After the victims transferred funds to these shell companies, the conspirators monitored subordinates to move the funds to overseas accounts at Deltec Bank in the Bahamas.

An account at Deltec Bank operated under Li’s financial control. These funds were then converted to cryptocurrency and sent to virtual asset wallets, at least one of which was controlled by Li. Zhang also allegedly received funds directly from victims.

Communications indicated extensive coordination to facilitate the international laundering activities, including discussions on the network’s commission structure, various shell companies used, victim information, and at least one video of a conspirator calling a U.S. financial institution.

Brian Lambert, Assistant Director of Investigations for the U.S. Secret Service, stated, “Complex financial fraud schemes like pig-butchering pose a clear and present threat to the U.S. financial infrastructure, with countless Americans continuing to fall victim to these predatory activities.”

“In 2023, the Secret Service and our partners recovered over $1.1 billion in financial fraud cases, and this year we are on track to surpass that number. Special thanks to the agents, support teams, and our prosecutorial partners for their outstanding work in bringing this case to justice.”

It is important to note that an indictment is merely an accusation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in court.

The Global Investigative Operations Center of the U.S. Secret Service is investigating this case.