In December 2023, a money laundering case involving the trade of Moutai liquor and funds from the cryptocurrency circle was concluded in the first instance in the Yutang District of Xiangtan, Hunan: 8 defendants were convicted of assisting a telecom fraud gang in handling illicit funds. On the surface, this appears to be a series of "normal" high-end liquor transactions, with the accounted funds nearing 20 million yuan, but the actual amount linked to the fraud was only over 6.84 million yuan. The huge disparity between the two figures highlights the magnifying effect of professional money laundering chains that complete the "cleaning" of funds through repeated "jumping of accounts." One end of this chain is connected to physical offline trade, while the other links to the dark currents within the cryptocurrency circle, fabricating Moutai transactions and leveraging U merchants and virtual assets to achieve cross-account and cross-regional fund transfers. The core issue has thus emerged: how to prevent "physical trade + cryptocurrency" from being merged into a covert and efficient black gold channel, especially outside the traditional financial regulatory focus?

Moutai Business is Just a Cover: Illicit Funds...

On this money laundering pathway, Moutai liquor is not a truly circulating commodity but is packaged as a "scripted business." The gang fabricated large sales contracts and forged account reconciliation records to disguise telecom fraud proceeds as upstream "liquor purchase payments" or downstream "goods payment settlements," creating a facade of frequent and seemingly reasonable liquor trading. What is presented externally is a booming liquor wholesale business, while the reality is an "entrance ticket" for illicit funds.

The key to this model lies in utilizing large and high-frequency liquor transactions to conceal the true source and destination of funds. Moutai, being a high-value and price-volatile commodity, can inherently accommodate account fluctuations of hundreds of thousands or even millions, providing a natural cover for "suspicious funds." After the fraud proceeds are dispersed into multiple accounts related to liquor trade, they are repeatedly transferred under the guise of purchasing, shipping, and returns, making the bank transaction flows formally indistinguishable from those of legitimate trading enterprises, thereby blurring the boundaries for identifying suspicious transactions within anti-money laundering systems.

With fund flows nearing 20 million yuan, yet only corresponding to over 6.84 million yuan in fraudulent proceeds, the numerical amplification signifies that the same sum of illicit funds is "laundered" multiple times between different accounts and under different aliases. Each transfer adds a new layer of transaction background, complicating subsequent identification. Meanwhile, the gang extracts a commission at an approximate rate of 8%, suggesting that from the nearly 20 million yuan in fund flow, potential money laundering profits could reach the hundred-thousand level. For offline participants, this money laundering chain centered on liquor trade presents high turnover and high commission characteristics in a short time, while the actual merchandise transactions serve merely as a carefully designed cover.

From Telecom Fraud to U Merchants: Foreign Chat Software...

To ensure that telecom fraud proceeds successfully undergo a "transformation" from victim accounts, relying solely on the offline Moutai script is insufficient; a close connection between the fraud gang, money laundering gang, and U merchants is essential. The fraud gang is at the upstream of the chain, responsible for executing fraud through telecom networks and concentrating the illicit funds; the money laundering gang acts as a midstream hub, tasked with connecting fund accounts, fabricating Moutai trade scenarios, and directing the illicit funds into their controlled account system; U merchants reside downstream in the chain, converting the initially "disguised" funds into virtual assets within the cryptocurrency circle and facilitating the funds' further departure from the traditional financial view.

The three parties' connections occur not through public channels but rely on foreign encrypted communication software for collaboration and negotiation. In such an environment, the fraud gang can accurately throw the "funding demand" to the money laundering gang and U merchants, who then price the money laundering commission based on market conditions and risks, arranging specific fund arrival paths. Encrypted communication provides high privacy and cross-border cooperation efficiency, allowing messages, accounts, and instructions to circulate outside traditional regulatory borders, thereby creating conditions for rapid exchanges between funds and virtual assets.

The combination of foreign communication tools and roles in the cryptocurrency circle makes this chain more covert and flexible during cross-border and cross-system fund transfers. On one hand, cross-border communication reduces risks of being collectively "swept up" within the same jurisdiction; on the other hand, the global reach and high liquidity of virtual assets enable rapid switching of funds across multiple trading scenarios, increasing tracking complexity. It is important to emphasize that current public information has not disclosed the specific cryptocurrencies involved or the detailed operational methods of U merchants. This article also intentionally avoids making any inferences or extrapolations regarding types of currencies, transfer paths, etc., to prevent providing misaligned "tutorials" for real-life crimes or causing misunderstandings about legitimate activities in the cryptocurrency circle.

The 8% Commission Code: Money Laundering Industry...

A key figure disclosed in the case is that the gang "takes about 8% per transaction." Based on the nearly 20 million yuan in account turnover, even if not all flows correspond to substantial money laundering activities, the processing scale of the over 6.84 million yuan in illicit funds could still yield profits reaching hundreds of thousands or millions. If the commission base is expanded to encompass a larger proportion of total fund flows, the potential profit range further increases. This model, characterized by "point-to-point ordering + high percentage commissions," essentially monetizes the legal risks, converting criminal liabilities into short-term windfalls.

Legal experts have pointed out that the approximately 8% level of money laundering commission reflects the typical criminal economics logic of binding high risks to high returns: on one hand, participants are acutely aware they are "cleaning" telecom fraud proceeds and face substantial criminal accountability; on the other hand, commission levels far exceeding ordinary financial service rates are sufficient to attract individuals who possess account resources, social networks, or channels in the cryptocurrency sphere to take risks. In the "grey market," the higher the risk, the higher the commission, and the easier it is for the money laundering chain to attract new participants.

In terms of comparing criminal costs and sentences, in this case, 7 defendants were sentenced to 2 to 6 years in prison, while another received a suspended sentence. Such outcomes are not light. However, in reality, some participants often harbor a sense of luck, believing that the money laundering phase is distanced from the “front-end crime” of telecom fraud—they think of it merely as "assisting with collections" or "processing a transaction," underestimating that "concealing and hiding criminal proceeds" is itself an independent serious crime. More alarmingly, the "physical trade + virtual assets" model presented in this case is not isolated. The grey space combining high-value physical goods like famous liquors, precious metals, luxury items, etc., with cryptocurrency channels, once it starts to form fixed "quotes" and mature intermediary networks in certain regions or groups, may yield a potential scale far exceeding that of a single case, posing a long-tail risk to financial order.

Prosecution's Early Involvement: Electronic Evidence...

Faced with such a complex money laundering pathway across accounts and scenarios, the traditional model of "investigating after a case occurs" often struggles to timely lock down key evidence. In this case, prosecutorial authorities chose to intervene early in the investigation, collaborating with public security agencies to assess the flow of funds, specifically guiding evidence collection directions, and using electronic data, account information, and communication records as breakthrough points. On one hand, this helps case-handling departments quickly clarify the true logic behind the fictitious Moutai business receipts and payments; on the other hand, it also lays a foundation for subsequently presenting the criminal facts in a "full-chain" manner.

At the technical level, a substantial amount of electronic data becomes crucial for reconstructing the trajectory of funds. Law enforcement agencies need to sift through vast amounts of bank transactions to identify "suspicious rings" that either closely correlate with or revolve around the over 6.84 million yuan in illicit funds and then verify these financial nodes with encrypted communication records and trading dialogues, piecing together a complete path from telecom fraud to accounts, and then to the cryptocurrency circle. The chat records and account binding information from foreign communication software also provide important clues evidencing the division of labor and connections between the fraud gang, money laundering gang, and U merchants.

As emphasized by prosecutors in the case briefing, this case achieved a full-chain crackdown on the "physical trade + virtual currency" composite money laundering pathway. The so-called "full chain" encompasses not only a closed loop of behaviors from telecom fraud to money laundering and then to outflow stages but also a transformation of investigation and evidence collection from a single-point breakthrough to systemic suppression. Technical evidence gathering capabilities and inter-departmental collaboration mechanisms are becoming core capability thresholds in combating new types of financial crime: only by ensuring that the flow of funds, information, and behavioral chains are highly consistent with the evidence can a complete narrative supporting convictions and sentencing be formed in court.

Charges of Concealing and Hiding Criminal Proceeds Grounded:...

Legally, this case did not pursue the "front-end responsibility" of the 8 defendants directly under the crime of telecom fraud, but instead characterized them according to the provisions on concealing and hiding criminal proceeds and the benefits thereof in the Criminal Law. This charge specifically targets behaviors that knowingly involve criminal proceeds and their profits, which are concealed and disguised through methods such as transfer, reception, sales on behalf, replacement, and settlement. Fabricating Moutai transactions, arranging the flow of illicit funds across multiple accounts, and further transferring through cryptocurrency channels all fall within the normative range of "payment settlements, replacements, and transfers."

The judgment results show that 7 defendants received prison sentences ranging from 2 to 6 years, with one receiving a suspended sentence based on factors such as circumstances and attitude towards confessing. The differences in sentencing reflect the court's careful distinctions considering each defendant's position in the chain, degree of participation, profit amounts, and whether they were the principal planners. The message released by this ruling is clear: regardless of which part of the money laundering industry chain one is in, from providing accounts to acting as “intermediaries” to being responsible for cryptocurrency outflows, as long as they are objectively involved in the "cleaning" of illicit funds and subjectively not completely unaware of the criminal nature, they could fall within the prosecutable range of this charge.

For the cryptocurrency ecosystem, the deterrent effect of this case on various touchpoints should not be underestimated. Exchanges, over-the-counter merchants, and ordinary users facing suspicious sources, abnormal paths, or funds accompanied by high commission promises will all endure more tangible compliance pressures: trading platforms need to elevate standards in KYC, transaction monitoring, and anomaly address identification; over-the-counter facilitators need to reassess the legal consequences of "helping to process transactions"; and ordinary users must recognize that passively accepting funds with clearly abnormal characteristics can also entangle them in the judicial risks of "concealing and hiding criminal proceeds."

From One Case to the Bigger Picture: Cryptocurrency Money Laundering Prevention...

Reflecting on the Xiangtan case, the money laundering model of "Moutai business + virtual assets" points to structural issues within the traditional regulatory system: on one end is a physical goods trade with rich "story space" in offline economic scenarios, and on the other is the cross-border, highly liquid, and technically sophisticated infrastructures of the cryptocurrency sphere. When these two are systematically stitched together, regulation must penetrate both booked transactions and identify fictitious trades, while also achieving data connectivity between on-chain and off-chain, which poses higher demands on risk control rules, technical investment, and inter-departmental collaboration.

It is foreseeable that the prosecutorial and police systems will continue to upgrade in terms of on-chain analysis and cross-border cooperation. On one hand, by collaborating with professional technical teams, they will enhance capabilities in clustering and analyzing suspicious addresses, as well as mapping identities between on-chain and off-chain, reducing the response time from "discovering abnormal funds" to "locking real identities"; on the other hand, by sharing information with overseas law enforcement agencies and compliant trading platforms, they will break the illusion of funds "going missing" after leaving the country and weave more tightly-knit anti-money laundering networks globally.

For investors and practitioners, an unavoidable topic is how to clearly differentiate compliant funds from black money flows in daily operations. Any channel claiming "no documentation, instant account arrival, high commissions" should be treated as a high-risk signal; projects that masquerade as "physical trade" but repeatedly emphasize "quick cash turnover, high profits" warrant even greater caution. The openness and innovation of the cryptocurrency sphere do not equate to an ability to accommodate unbounded money laundering experiments; participants need to make a clear choice between profit-driven impulses and compliance red lines.

The Xiangtan case is unlikely to be the last "physical + cryptocurrency" money laundering case publicly exposed. As regulatory focus intensifies, similar cases revealed, adjudicated, and disseminated may become a regular phenomenon. In the long run, this persistent law enforcement pressure will squeeze the survival space of the grey areas in the cryptocurrency sector, forcing more funds and operations back to transparent, traceable, and accountable compliance tracks, and also accelerating the entire industry towards compliance and institutionalization.

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