Chinese Authorities Tighten Grip Amid Rising Identity Thefts and Financial Crimes
Alleged AI Schemers Arrested
Overt Operator
August 11, 2023
In response to a recent surge in personal identity thefts and digital financial crimes, Chinese authorities are intensifying their examination of the Web3 sector. The crimes, involving Trojan viruses, phishing sites, infiltration tools, and cyberstalkers, have prompted serious concern and decisive action from officials.
During an August 10 press conference hosted by China's Ministry of Public Security, Jinfeng Sun, political commissar of the Network Security Bureau, spoke about the alarming rise in cybercrimes. Specifically, Sun detailed the government's growing scrutiny over new and emerging technologies such as Chat GPT, cloud computing, blockchain, and deepfake AI.
The use of deepfake AI for fraudulent activities such as digital face-swapping has led to 79 cases and the arrest of 515 individuals.
Additionally, 21 individuals were arrested by Shangxi Police on July 18 in connection with an alleged 54.8 million Tether money laundering scheme. The suspects were accused of buying USDT from Chinese residents at below-market value, selling them for fiat on overseas exchanges, and profiting from the difference while moving clients' money abroad.
China's strict capital controls, which limit nationals from purchasing more than $50,000 worth of foreign currencies annually, have been tested by these intricate financial schemes. The ongoing scrutiny of emerging technologies and their potential for misuse is part of a broader effort to strengthen the regulatory environment and protect citizens from fraud.
Yet, the crackdown has not been without controversy. Some have accused Chinese police of misusing their power, allegedly embezzling funds from crypto projects during enforcement activities.
A notable example occurred last month when the cross-chain protocol Multichain became defunct after the arrest of its CEO, Zhaojun He. Details of his detention remain undisclosed, and funds belonging to Multichain developers and users were converted to stablecoins and privacy coins before being transferred out of the exchange.