Hong Kong police say they have dismantled a sophisticated cross-border money-laundering syndicate that washed roughly HK$118 million ($15 million) through cryptocurrency and more than 500 bank accounts.
The operation culminated on 15 May with simultaneous raids in Hong Kong and mainland China that resulted in the arrest of 12 suspects aged between 20 and 41.
Investigators allege the group recruited “stooges” to open local bank accounts, funnel the proceeds of online fraud into those accounts, and swiftly convert the money into crypto at over-the-counter exchange shops.
By exploiting the near-instant transferability of digital assets, the network was able to obscure the origin of funds linked to at least 58 fraud cases, police said.
Senior Inspector Tse Ka-lun of the Commercial Crime Bureau revealed that family and friends of the suspects were persuaded to lend their personal banking credentials, creating a web of accounts that proved difficult to trace.
Officers had the group under surveillance when two couriers left a rented flat in Mong Kok on the morning of the raids, one heading to a bank branch and the other to an ATM.
Both were trailed to a crypto exchange in Tsim Sha Tsui, where plain-clothes detectives moved in and seized about HK$770,000 in cash moments before it could be converted.
Follow-up searches at the apartment uncovered HK$1.05 million in cash, more than 560 ATM cards, stacks of bank statements and detailed ledgers of crypto transactions.
Police believe the syndicate had been operating for several months and was gearing up to scale its laundering capacity before the intervention.
The arrests come amid a surge in cyber-enabled fraud in the city, which recorded a 12 percent year-on-year increase in scam reports during 2024.
How the scheme operated
Authorities say over 10,000 fraud-related arrests were made last year, and almost three quarters involved holders of so-called stooge accounts.
Hong Kong has tightened its oversight of cryptocurrency businesses in response, hoping to strike a balance between nurturing innovation and safeguarding investors.
In April, the Securities and Futures Commission imposed fresh requirements on exchanges that offer staking services, including stringent know-your-customer checks and auditing obligations.
Two months earlier, officials rolled out a multi-year roadmap aimed at expanding compliant product offerings, bolstering infrastructure and building closer ties with Web3 firms.
The Commercial Crime Bureau said the latest case underscored the need for robust customer due diligence in both traditional and digital finance.
“Criminals continue to exploit bank accounts opened under borrowed identities and the speed of crypto transfers to hide illicit proceeds,” Inspector Tse warned.
Local analysts note that the police action may further reassure global exchanges seeking licences under Hong Kong’s new virtual-asset regime.
They also caution that criminals are likely to test alternative laundering channels, including privacy coins and cross-chain bridges, as regulations tighten.
Investigators are now tracing the on-chain footprint of wallets linked to the seized ATM cards and working with exchanges to freeze any remaining funds.
Cyber-security experts say the arrests demonstrate a growing sophistication among Hong Kong law-enforcement agencies, which increasingly combine blockchain analytics with traditional detective work.
The suspects, who remain in custody, face potential charges of conspiracy to deal with property known or believed to represent proceeds of an indictable offence.
Conviction carries a maximum sentence of 14 years in prison and a fine of HK$5 million.
Prosecutors are expected to decide on formal indictments once forensic accountants finish analysing the trove of bank and crypto records.
Meanwhile, authorities are urging residents to remain vigilant against phishing scams and investment schemes that promise unrealistic crypto returns.
Police have also called on banks to strengthen monitoring systems that flag rapid transfers followed by immediate cash withdrawals or crypto purchases.
Financial watchdogs hope tougher compliance and consumer education will shrink the pool of ready-made accounts that laundering syndicates rely upon.
Industry groups support the crackdown but warn that excessive compliance burdens could push smaller crypto start-ups offshore.
Lawmakers have scheduled a review of anti-money-laundering provisions later this year to ensure they keep pace with technological change.
The outcome of that review is likely to influence the city’s bid to brand itself as a leading, well-regulated digital-asset hub in Asia.
For now, investigators say the swift bust has prevented millions in alleged scam proceeds from disappearing into the blockchain’s maze of addresses.
They add that cooperation with mainland authorities was crucial, highlighting increased cross-border intelligence sharing on crypto crime.
Police declined to rule out further arrests as the probe widens to identify masterminds who may still be at large.
Asset-recovery proceedings are already underway to return funds to victims once ownership is verified.
Observers say the case will serve as a reference for regional forces confronting a similar convergence of cyber fraud and cryptocurrency.
It also sends a signal that Hong Kong, despite welcoming Web3 businesses, intends to act decisively against abuse of digital assets.
Next steps in the investigation
Detectives are analysing phone data seized in the raids to uncover communication with overseas exchangers and darknet brokers.
Blockchain-forensics firms have been enlisted to map transaction flows and correlate them with known fraud wallets.
Authorities are weighing whether to seek restraint orders on additional bank accounts connected to relatives of the suspects.
Police have advised local OTC shops to install surveillance cameras that capture both faces and wallet addresses displayed during transactions.
Training programmes for frontline officers will be expanded to include real-time crypto tracing tools and refresher courses on exchange-shop typologies.
The Commercial Crime Bureau believes such measures will shorten response times in future cases and deter would-be launderers.
Financial institutions, for their part, welcome clearer guidance on red-flag patterns that indicate crypto-related laundering.
As regulations evolve, industry experts expect collaboration between RegTech providers and law enforcement to deepen.
Ultimately, officials say, safeguarding the integrity of Hong Kong’s emerging digital-asset market is essential for its long-term competitiveness.
The success of this week’s operation, they argue, marks a step toward that goal.