"Global Scam Network Unearthed: $98B in Illicit Crypto Laundered by Underground Empire"

Shengsheng He, a resident of La Puente, California, was sentenced on Monday to 51 months in federal prison for his role in laundering nearly $37 million from U.S. investors through a global cryptocurrency scam. He was also ordered to pay $26.9 million in restitution. He, who co-owned Axis Digital Limited, a Bahamas-based entity, was part of a scheme that used unsolicited messages, phone calls, and dating app conversations to establish trust with victims. The DOJ detailed how the group promoted fraudulent digital asset investments, falsely claiming that victims' investments were appreciating in value while siphoning the funds into a single Axis Digital account at Deltec Bank in the Bahamas. The stolen funds were then converted into Tether (USDT) stablecoin and moved to wallets controlled by the scammers. The scheme relied on shell companies and overseas accounts to obscure the origin of the funds. The scam, which operated out of Cambodian “pig butchering” centers, netted $9 billion in 2024, according to Chainalysis. These fraud rings use social engineering to defraud victims, who believed they were investing in legitimate digital assets. The U.S. Department of Justice (DOJ) has intensified its efforts against crypto-related fraud, seizing assets, returning funds to victims, and targeting offshore exchanges used for laundering illicit funds. Eight co-conspirators have also pleaded guilty in the Axis Digital case, including He’s business partners Jose Somarriba and Jingliang Su, the latter of whom is a Chinese national who helped convert and transfer stolen funds. In March, the DOJ seized $201,000 in crypto linked to Hamas, and in July, it returned $7.1 million to victims of a $97 million oil and gas fraud scheme. The DOJ also took down domains tied to Russian-run exchanges accused of processing over $800 million in illicit transactions. The takedown of He’s operation is part of a broader crackdown that includes recent actions against the infamous Huione Group, a Southeast Asian financial institution identified by FinCEN as a primary money laundering concern. Huione has been instrumental in laundering proceeds from cyber heists carried out by the Democratic People’s Republic of Korea and transnational criminal organizations in Southeast Asia, including those perpetrating digital asset investment scams. In a separate but related development, Telegram announced the takedown of a massive cybercrime marketplace known as Haowang Guarantee, which had previously operated under the brand Huione Guarantee. The platform, which was primarily hosted on Telegram, was used to facilitate roughly $27 billion in transactions, mostly in USDT, according to blockchain analytics firm Elliptic. The broader Huione-linked ecosystem may have processed over $98 billion in illicit transactions. The platform provided tools for scammers, including fake identification documents, deepfake technology, telecom systems, and physical restraints used in Southeast Asian scam compounds. Telegram confirmed that all groups and accounts flagged by investigative journalists and blockchain security researchers had been removed from the platform. The U.S. Treasury’s FinCEN also labeled the platform a major money laundering operation and took steps to disconnect it from the U.S. financial system. The dismantling of the platform was hailed as a “game-changer” by Elliptic co-founder Tom Robinson, who noted that it would significantly disrupt global scam infrastructure and provide relief to countless fraud victims worldwide. The broader context of these developments includes an escalating crisis in Southeast Asia, where transnational cyber scam networks have defrauded Americans of over $10 billion in 2024 alone, a 66 percent increase from the prior year. These scams are often facilitated by criminal networks operating in hubs such as Shwe Kokko in Burma and Sihanoukville in Cambodia. The U.S. Treasury has taken a series of actions to combat these operations, including the designation of entities and individuals involved in human trafficking, forced labor, and cyber-enabled financial crimes. The financial and social costs of these scams are profound. Victims are often targeted using sophisticated social engineering tactics, including the promise of romantic relationships or friendships, to gain their trust. Once trust is established, victims are lured into making purported “investments” in virtual currency on fraudulent platforms. These operations are frequently staffed by individuals with English language skills, many of whom are coerced into working under conditions of debt bondage, violence, and forced labor. The U.S. government has emphasized the need to disrupt the entire ecosystem of these scams, including the financial networks and infrastructure that enable them. The scale of the problem is such that it not only threatens the financial security of individuals but also undermines the stability of the global financial system. The Treasury’s actions reflect a broader effort to address the systemic nature of these scams, which have evolved from isolated incidents into complex, transnational operations. The use of offshore financial systems, including those in the Caribbean and Southeast Asia, has allowed these scams to operate with a high degree of anonymity and resilience. The recent enforcement actions—ranging from sanctions and designations to the takedown of platforms like Haowang Guarantee—highlight the challenges faced by global regulators in combating a rapidly evolving threat landscape. The ultimate goal is to dismantle the financial infrastructure that supports these criminal enterprises and to hold accountable those responsible for perpetuating them.

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[1] California Man Sentenced in $37M Crypto Scam Amid ... (https://finance.yahoo.com/news/california-man-sentenced-37m-crypto-004054127.html)

[2] Telegram Shuts Down $27B Crypto Scam Network (https://cryptodnes.bg/en/telegram-shuts-down-27b-crypto-scam-network/)