Chinese authorities have dismantled a significant Bitcoin laundering operation linked to Kuaishou, a major short-video platform, involving the embezzlement of nearly 140 million yuan (around $20 million) by eight employees.

The ringleader, an employee named Feng, exploited internal incentive policies and leaked data to collaborators, enabling fraudulent claims for reward funds intended for legitimate business development.

To facilitate the laundering of the stolen funds, shell companies were established, and the money was transferred through eight offshore crypto exchanges, converting it into Bitcoin in multiple batches.

The embezzlement scheme utilized sophisticated methods, including over-the-counter (OTC) desks, mixing services, and multi-hop wallet transfers to effectively obscure the transaction trail.

Crypto mixing services were employed to complicate the tracing process of the laundered assets, making it difficult to determine their origin and destination.

Chinese law enforcement successfully tracked and seized over 90 Bitcoin linked to the laundering scheme, resulting in prison sentences for the involved individuals ranging from six months to 14 years for financial misconduct and embezzlement.

The Haidian District People’s Court in Beijing sentenced Feng to 14 years and six months, while his co-conspirators received prison terms ranging from three to 14 years for their roles in the embezzlement.

This case underscores China's stringent approach towards cryptocurrency-related crimes, despite a ban on crypto trading since 2017 and a declaration of all digital asset transactions as illegal in 2021.

The Chinese Ministry of Public Security is intensifying efforts to combat money laundering associated with cryptocurrencies, particularly those linked to international criminal networks.

The case reflects a larger trend of increasing commercial corruption linked to digital assets, with 1,253 commercial corruption cases reported in China from 2020 to 2024, many involving cryptocurrencies.

Prosecutor Li Tao emphasized the importance of digital evidence in uncovering the scheme and prosecuting those involved in crypto-enabled crimes.

Through blockchain analysis and international collaboration, investigators successfully traced and recovered 92 Bitcoin, valued at approximately 89 million yuan ($11.7 million), which was returned to Kuaishou.