In June 2026, the Jing'an District People's Procuratorate of Shanghai disclosed a case involving over 200 million yuan in illegal cross-border currency swapping, in which the client represented by lawyer Shao Shiwei's team received a suspended sentence. On June 29, 2026, the Jing'an District People's Procuratorate of Shanghai publicly disclosed a series of cases involving illegal cross-border currency swapping disguised as "private banking" and using virtual currency as a front, drawing attention. The case spanned three years, involving over 200 million yuan, and involved multiple links including domestic and foreign client managers, traders, customer service representatives, intermediaries, and credit card holders. It reflects that underground banking crimes are evolving from traditional cash and bank account models to a new form of "virtual currency + domestic and foreign fund pools + cross-border swapping." During the related trials of this series of cases, lawyer Shao Shiwei's team from the Shanghai Mankiw Law Firm represented one of the defendants. According to a public report by the Jing'an District People's Procuratorate of Shanghai, "Company Z was registered overseas in 2019 by Zhou, and promoted itself as a 'private bank,' developing a virtual banking app to create a false impression of legitimacy. The company only had an office in China and did not obtain a foreign exchange business license, but was actually engaged in illegal foreign exchange activities. When clients had currency exchange needs, they would contact study abroad or immigration agencies, who would then introduce them to Company Z. Account managers Gao and Li would arrange for traders and customer service representatives to connect with clients in groups, requiring them to purchase virtual currency from virtual currency exchangers through various means and deposit it into Company Z's overseas virtual wallet. The group would then exchange the virtual currency for foreign currency overseas and transfer it to the client's designated overseas account. There was no real cross-border flow of funds; only separate settlements were made between domestic and overseas funds. Company Z collected a 3% exchange service fee and gave the intermediaries a 0.5% commission." Faced with the large amount of money involved, the complex chain of events, and the potential criminal risk of being classified as "particularly serious," the legal team led by lawyer Shao Shiwei focused on the specific roles and positions of the defendants, the corresponding relationships within the financial chain, the closure of evidence, and sentencing considerations. Ultimately, the court sentenced the client to probation. The summary of the judgment shows that the Jing'an District People's Court of Shanghai, after hearing the case, ultimately applied probation to the client represented by lawyer Shao Shiwei's team. This series of cases, publicly disclosed by the Jing'an District People's Procuratorate of Shanghai in June 2026, involved over 200 million RMB and is a typical case of a new underground bank model combining "virtual currency + domestic and foreign fund pools + cross-border offsetting."(Relevant information has been anonymized) To protect the privacy of the parties involved, this article does not disclose the identities of the parties or the details of the non-public cases. It only reviews the defense difficulties and industry risks in cross-border currency exchange cases involving virtual currencies, based on publicly available reports from the procuratorate, information disclosed in judgments, and case-handling experience. Criminal Risk Background of Virtual Currency Cross-Border Exchange Cases In recent years, cross-border virtual currency cross-border exchange cases have occurred frequently. How is the essence of "illegal foreign exchange trading" determined in judicial practice? Based on the 200 million yuan series of cases publicly disclosed by the Jing'an Procuratorate, this article dissects the criminal filing logic and risk boundaries of such cases. Cases involving criminal liability for underground currency exchange, introducing foreign exchange trading, and cross-border virtual currency cross-border exchange are gradually increasing. Especially with the demand for overseas property investment, immigration, study abroad, asset allocation, and cross-border investment, some institutions or individuals, under the guise of "private banks," "overseas licensed institutions," and "special exchange channels," provide so-called convenient exchange services to clients. However, from a judicial practice perspective, such behavior does not change its essence of illegal foreign exchange trading simply by adopting the guise of "private banking" or "virtual currency trading." As long as related transactions circumvent national foreign exchange regulations and complete the exchange of RMB and foreign currency through domestic and foreign capital pools, virtual currency acceptors, and underground channels, they may be deemed to be disrupting financial management order and thus subject to criminal liability for illegal business operations. This case entered the criminal justice process under this background. Due to the massive transaction volume, numerous participants, and cross-border funding links in the series of cases, key issues affecting the case's outcome include how to distinguish the roles and positions of different participants, how to examine the relationship between the overall transaction volume and individual responsibility, and how to determine whether the specific executors should bear primary responsibility. New Model of Illegal Currency Exchange: How Does Cross-Border Virtual Currency Matching Work? How do "private banks" use virtual currency to complete domestic and foreign capital matching? This section, based on the case details disclosed by the procuratorate, reconstructs the complete exchange chain from RMB to virtual currency to foreign currency, revealing the illegal business nature behind the 3% service fee. In traditional underground banking cases, illegal currency exchange typically manifests as the settlement of domestic RMB funds with overseas foreign currency funds. With the development of virtual currency trading, some underground exchange chains have begun to use virtual currency as an intermediary to connect domestic RMB funds with overseas foreign currency funds. In this case, according to a public report by the Jing'an District People's Procuratorate of Shanghai, relevant personnel recruited customers with foreign exchange needs through Company Z and arranged customer service and traders to guide customers in their operations.After a customer transfers RMB to a cryptocurrency exchanger's account, the cryptocurrency exchanger and related companies then convert the cryptocurrency into the corresponding foreign currency, which is ultimately transferred to the customer's designated overseas bank account, with a foreign exchange fee of approximately 3%. On the surface, RMB funds are not directly transferred overseas, and the foreign currency is not directly paid from a domestic bank account. However, in reality, the customer, by paying RMB or transferring cryptocurrency, ultimately obtains foreign currency overseas, thus completing the value exchange between RMB and foreign currency. Cryptocurrency is not a "compliant channel" in this process, but rather a tool to conceal the capital flow and sever the correspondence between domestic and foreign funds. This is also a key characteristic of recent cases involving illegal cryptocurrency operations: because transactions often employ a covert "wash trading" model between domestic and foreign entities, the flow of RMB and foreign currency funds no longer directly corresponds. The difficulty in investigation and prosecution no longer lies in whether "foreign exchange occurred," but in how to comprehensively examine RMB transaction records, cryptocurrency on-chain records, overseas payment vouchers, chat logs, and role divisions to legally penetrate and reconstruct the complete wash trading chain. The 200 million RMB involved does not mean everyone is fully responsible: How are the boundaries of individual responsibility defined? With over 200 million yuan involved, does this mean every defendant faces a heavy sentence? This article focuses on the core defense argument in this case: "Total transaction volume ≠ individual responsibility," dissecting the evidentiary relationship between the money trail and the specific roles of the perpetrators. In cases involving illegal foreign exchange trading, the amount is often the most direct and easily influential factor in sentencing. Especially in cross-border currency exchange cases, transaction volumes can easily reach tens or hundreds of millions of yuan. Once deemed illegal business volume, the case can easily fall into a heavier sentencing range. However, the evaluation of criminal liability cannot be based solely on numbers. For specific participants, what truly needs to be examined is: whether they actually controlled the money pool, whether they determined the transaction prices, whether they possessed the cryptocurrency wallet, whether they organized customer development, whether they participated in profit distribution, whether they shared a common criminal intent in all transactions, and whether there is a complete evidentiary relationship between each transaction and their actions. In other words, a huge total transaction volume does not automatically mean that every participant should bear equal responsibility for the entire transaction. The transaction volume is merely the starting point for examination, not an automatic conclusion. Lawyers need to go back to each transaction itself, analyze the relationship between the introduction, matchmaking, fund delivery, virtual currency transfer, and foreign currency receipt, and determine whether there is a complete chain of evidence for the transaction and whether the responsibility can be attributed to the specific party involved.In this case, the client represented by Attorney Shao Shiwei's team was responsible for specific execution tasks such as liaising with cryptocurrency exchange providers and coordinating currency exchange matters. They were not the organizers of the entire currency exchange chain, the controllers of the fund pool, or the overall business decision-makers. Therefore, the key to the case is not merely "how much money was involved in the series of cases," but rather to further answer: which transactions did the defendant participate in, what responsibilities did they bear, did they control core resources, and is there a clear correspondence between their actions and the relevant amounts? This is also the core premise for whether this case can secure probation. Four-Step Defense Method: How to Penetrate the Funding Chain to Secure Probation Based on publicly available data from the Jing'an Procuratorate and combined with cases handled by Attorney Shao Shiwei's team, this paper dissects the logic of probation defense in cases of illegal cryptocurrency operations from four dimensions: role and status, funding chain, evidence loop, and sentencing factors. Regarding the focus of the case, Attorney Shao Shiwei's team did not simply remain at the superficial defense of "the client is not the principal offender" or "the client is merely an executor," but instead launched a defense from four levels: the scope of personal responsibility, role and status, evidence loop, and sentencing factors. First, regarding role and status, the legal team focused on clarifying the client's true position in the transaction chain. In underground currency exchange and cryptocurrency swapping cases, the roles of organizers, controllers, account managers, traders, customer service representatives, intermediaries, and cryptocurrency exchange brokers are often intertwined. While the actions of different participants may appear related to currency exchange transactions, their actual roles, control capabilities, and degrees of responsibility differ. For traders, customer service personnel, sales staff, or those in specific execution positions, their involvement in some communication or coordination does not automatically make them the leaders of the entire criminal chain. Secondly, regarding the financial flow, the legal team meticulously reviewed relevant transaction records, fund transfers, and chat logs, comparing and analyzing the transaction background, fund flows, communication content, and the degree of involvement of the parties involved, in conjunction with case files. Transactions forming a complete chain of evidence were evaluated according to law; for amounts lacking complete evidentiary support and unable to prove a substantial connection to the parties' actions, the defense argued that they should not be simply included in their personal liability. Secondly, regarding the closed-loop evidence, the legal team focused on examining whether the relevant RMB account statements, cryptocurrency transaction records, exchange merchant communication records, customer chat logs, and overseas payment receipts could corroborate each other. The complexity of cross-border cryptocurrency exchange cases lies in the fact that bank statements, on-chain records, and communication records do not necessarily correspond one-to-one naturally.Without a complete closed loop, the amount of responsibility of a specific perpetrator cannot be simply inferred from the entire case's transaction history. Finally, regarding sentencing factors, the legal team comprehensively explained the client's attitude of admitting guilt and showing remorse, return of illegal gains, prepayment of fines, specific job responsibilities, and depth of involvement, striving for a more case-specific evaluation by the court that aligns with the principle of proportionality between crime and punishment. Based on this, the Shao Shiwei legal team fully communicated with the handling authorities and submitted legal opinions, systematically elaborating on the client's specific role and position, the corresponding relationships within the financial chain, the closed loop of evidence, and sentencing factors. Judgment Result: Why Did the Court Apply Probation to the Defendant? The court ultimately applied probation to the client. This section, combined with the disclosable content of the judgment, explains how, in a series of cases involving substantial sums, the court made a case-specific evaluation of specific perpetrators based on the principle of proportionality between crime and punishment. After review, the court determined that the relevant actions constituted the crime of illegal business operations, but in sentencing, it comprehensively considered the specific role and position of each defendant, their attitude of admitting guilt and showing remorse, return of illegal gains, and prepayment of fines, ultimately applying probation to the client represented by the Shao Shiwei legal team. For a case involving cross-border cryptocurrency exchange with a complex transaction chain and a huge total amount, this result illustrates that even with a high overall amount, the criminal liability of specific perpetrators should be evaluated on a case-by-case basis, taking into account their actual scope of participation, role, attributable amount, and sentencing factors. This is precisely the core value of lawyers' work in cryptocurrency criminal cases. Faced with complex funding and organizational chains, defense work cannot remain at the superficial level of "whether they participated," but must further penetrate the perpetrator's true position in the entire case, clarifying whether they had an organizational, commanding, or controlling role, whether they should be responsible for all transactions, and whether there is a sufficiently clear evidentiary relationship between their actions and specific amounts. Compliance Red Lines: Why might immigration and study abroad agencies be accomplices? Immigration and study abroad agencies, cryptocurrency OTC merchants, wealth management institutions—who might become "accomplices" in illegal currency exchange chains? This section sets compliance red lines for practitioners in cross-border financial services, indicating that the starting point for criminal risk is far earlier than "personally exchanging currency." Such cases have a very strong warning significance for practitioners in related industries. Overseas property agents, immigration and emigration service agencies, study abroad agencies, wealth management institutions, insurance brokers, family offices, cross-border payment service providers, as well as virtual currency OTC exchange acceptors and over-the-counter transaction matchmakers, all frequently come into contact with clients' cross-border funding needs.Many risks don't begin with "personally exchanging currency," but rather with "introducing a channel to a client," "recommending an overseas payment solution," "creating a group chat to connect with currency exchange providers," and "assisting in confirming receipt of funds." Once these actions form a stable connection with an illegal foreign exchange trading chain, even if the perpetrator doesn't directly control the funds pool or personally complete foreign currency payments, they may still be included in the scope of joint criminal charges or administrative violations. Especially when the transaction amount is large, the transaction frequency is high, the client base is stable, and the referral activity continues, the perpetrator's criminal risk will be further amplified. For ordinary individuals, it's equally important not to easily lend out bank cards, payment accounts, or cryptocurrency wallet addresses, and even more so, not to help others collect or pay foreign exchange funds for so-called "kickbacks." Many people believe they are only providing accounts and helping with transfers, without participating in actual currency exchange transactions, but in judicial practice, such behavior may be considered part of different types of cases, such as illegal business operations, money laundering, concealing criminal proceeds, or aiding and abetting cybercrime. Cryptocurrencies are not a "safe haven" for foreign exchange regulation. On-chain transfers may seem anonymous, decentralized, and cross-border, but this does not mean they are untraceable, nor does it mean they can circumvent foreign exchange regulation. For individuals and institutions with genuine cross-border funding needs, legal and compliant funding arrangements are always safer than so-called "fast tracks." Legal Team and Case Observation In criminal cases involving cryptocurrencies, the key to defense lies not in "understanding cryptocurrencies," but in penetrating the transaction structure and organizational division of labor. This section reviews the underlying logic of the defense in this case for reference by practitioners in the Web3 and cross-border finance fields and legal colleagues. The difficulty in handling criminal cases involving cryptocurrencies lies not in the existence of individual transactions, but in how to locate the true role and legal responsibility of each defendant in a complex financial network and organizational division of labor. In cases of illegal currency exchange, lawyers need to penetrate the flow of funds to see the correspondence between RMB, cryptocurrencies, and foreign currencies; they also need to penetrate the organizational chain to clarify the true division of labor among organizers, fund pool controllers, account managers, traders, customer service, intermediaries, introducers, and cardholders; and they need to penetrate the surface of evidence to determine whether each transaction, each chat record, and each wallet transfer truly supports the assessment of the criminal responsibility of the specific party. In this case, Shao Shiwei's legal team defended the case based on this approach: instead of simply avoiding the amount involved or denying the fact of the transaction, they focused on the individual responsibility, specific actions, and the closed loop of evidence under the high-pressure situation of the entire case, in order to obtain a more compliant outcome for the client.Attorney Shao Shiwei has long focused on criminal defense and compliance in the Web3 and cryptocurrency fields, specializing in cases involving illegal currency exchange, illegal business operations, operating casinos, fraud, aiding and abetting fraud, and concealing criminal proceeds. For emerging cases involving cryptocurrencies, cross-border funds, illegal business operations, and cybercrime, the truly important thing is not just understanding the "currency" itself, but also understanding the underlying transaction structure, fund flows, personnel roles, and evidentiary logic. It is precisely in these details that criminal defense can find the appropriate boundaries of responsibility for specific perpetrators, even under the pressure of a "huge amount in the case." As the regulation of virtual assets and cross-border finance continues to deepen, similar cases will continue to emerge. For industry practitioners, so-called "client needs," "special channels," and "introductions from acquaintances" should not be excuses for circumventing foreign exchange regulations; for specific participants already involved in the case, the entire chain of events and the total amount should not simply cover individual responsibility. Returning to the facts, the evidence, and the true role of each person in the transaction is what deserves the most serious attention in these cases. Judgment in this case: [Mankiw Blockchain Legal Services]
Legal Precedent Set: Shanghai Crypto Underground Banking Case Demonstrates Judicial Shift Toward Proportional Sentencing in Virtual Currency FX Cases
In June 2026, the Jing’an District People’s Procuratorate of Shanghai publicly disclosed a landmark case involving over RMB 200 million in illegal cross-border currency swapping—masked as “private banking” and executed via a virtual currency matching model. The outcome, particularly the probation sentence received by a mid-tier operator represented by Attorney Shiwei Shao’s team, carries profound implications for crypto practitioners, OTC liquidity providers, and cross-border financial intermediaries. This is not a case about crypto per se, but about unauthorized foreign exchange intermediation disguised through blockchain-enabled wash trading loops.
The Structural Risk: Why This Isn’t “Just Crypto”
The operation’s illegal core lies in its functional substitution of traditional cross-border capital flows:
– Domestic RMB funds never left China; instead, clients paid OTC issuers to buy crypto (e.g., USDT) on local platforms.
– Offshore agents then settled equivalent foreign currency (e.g., USD, EUR) directly to clients’ overseas accounts.
– A 3% “service fee” (borne by clients) masked the illegal FX spread—exceeding SAFE’s de facto tolerance for spread arbitrators.
Critically, the procuratorate emphasized that crypto was not used as an investment asset or store of value, but as a structural tool to sever evidentiary links between domestic and offshore legs of the value transfer. The legal conclusion was clear: Virtual currency does not sanitize illegal foreign exchange if it enables capital flight or regulatory arbitrage.
Judicial Nuance: From “Total Volume = Guilt” to Role-Based Attribution
The most significant development is the judiciary’s move toward individualized culpability assessment. In cases with hundreds of millions involved, courts are now parsing:
– Control: Did the defendant manage the fund pool or wallet keys?
– Intent: Were they an organizer setting exchange rates or orchestrating client acquisition?
– Causal Proof: Is there a closed-loop chain (RMB payment → crypto receipt → offshore FX payout) tied directly to their actions?
– Profits: Did they take a disproportionate share (e.g., above market commissions)?
Here, the defendant—positioned as a coordinator between OTC liquidity providers and offshore FX agents—was not an owner, controller, or decision-maker. Crucially, prosecutors could not atomize 100% of the RMB 200M volume to their specific transactions. This evidentiary gap, amplified by the defendant’s post-arrest cooperation, restitution, and lack of control over funds, enabled the probation ruling.
Sector-Wide Implications
1. OTC Brokers Are Primary Targets
Crypto OTC desks that knowingly bridge RMB sellers to foreign currency buyers (especially for immigration, study abroad, or offshore asset transfers) now face dual exposure: illegal business operation ( Criminal Law Art. 225) and illegal foreign exchange operation (SAFE regulations). The 0.5% referral commission paid to intermediaries (e.g., immigration agencies) signals that even minor facilitation carries joint liability.
-
Wallet Providers & Wallet Address Leasers Are at Risk
Merely “helping friends” by renting wallet addresses or processing transfers for FX settlement—even with no knowledge of end-use—can be construed as aiding and abetting under joint criminal enterprise doctrines, particularly if done repeatedly or for profit. -
Compliance Red Lines for Industry Participants
If your business model involves: - Matching FX needs with crypto settlements
- Managing multi-user wallet aggregations
-
Collecting or routing funds for offshore payouts
…you are operating in the high-risk zone. This is true regardless of technical adherence to “P2P” or “decentralized” labeling. -
Defense Strategy: It’s About Penetration, Not Denial
Successful defense in these cases no longer hinges on crypto skepticism or “I didn’t know” claims. It demands forensic reconstruction: - Mapping the precise function of each actor across each transaction
- Demanding that attribution be tied to specific ledger hashes, chat logs, and payment trails
- Arguing that volume ≠ guilt when responsibility is non-homogeneous
Why This Matters for Investors
This is not an anomaly—it’s a template. Chinese regulators and courts are developing a three-layer forensic model for probing crypto-FX cases:
1. On-chain flow analysis (offshore FX payout tracing)
2. Entity correlation mapping (who communicated with whom, when, and why)
3. Profit allocation auditing (who benefited disproportionately)
For market participants, this means:
– DeFi protocols and “non-custodial” tools won’t insulate operators who build centralized liquidity or settlement layers.
– Rural OTC desks with offshore FX ties are sitting on ticking legal time bombs.
– Individuals in execution roles can still avoid prison—but only with early, forensic defense介入.
The sentencing here is not leniency. It’s precision. And for crypto investors, the takeaway is stark: In China’s regulatory framework, “crypto” only shields if the underlying activity itself complies with capital controls. Cross-border value flipping—even via blockchain—crosses the line.