Shanghai court gives five 5-6 years for $29M crypto fraud

A Shanghai court sentenced five people to prison terms of five to six years each for running an unauthorized cross-border cryptocurrency operation that moved more than $29.4 million out of China, court documents showed. The defendants used digital assets as a bridge to bypass the country's strict capital controls, effectively operating an unlicensed foreign exchange business.

Beijing banned commercial cryptocurrency activities in 2021, including trading, mining, and any transfers that function as unauthorized foreign exchange. The five individuals were not punished for holding crypto. They were punished for using it to run what the court described as an illegal foreign exchange operation.

The identities of the defendants, the specific cryptocurrencies used, and the blockchain protocols involved have not been publicly disclosed. The court did not detail any appeals or additional charges.

The case follows a 2025 Beijing ruling that addressed $166 million in similar money laundering schemes using USDT stablecoins. That earlier case involved a larger sum but the same basic mechanism: crypto as a cross-border payment rail.

Chinese courts have occasionally issued rulings that suggest personal ownership of digital assets may carry property-like legal status, separate from the prohibition on commercial transactions. Shanghai rulings from 2024 deemed assets like Bitcoin as virtual property or commodities. The distinction matters because the defendants in this case were not charged with holding crypto but with using it to move money across borders without a license.

China maintains strict limits on how much money citizens can move out of the country each year. The $29.4 million in this case represents a deliberate effort to bypass those limits using crypto.

Bitcoin and major altcoins showed no meaningful reaction to the news. Continued crackdowns on cross-border crypto transactions could further suppress trading volumes originating from China, a market that was once the dominant force in global crypto trading. The ruling makes clear that using crypto as a payment rail for cross-border transfers remains a criminal offense in China, separate from any debate over personal ownership.