In a joint announcement, Damian Williams, the United States Attorney for the Southern District of New York, and James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (FBI) have revealed the apprehension of ZHONG SHI GAO. It is also known as “George,” NAIFENG XU, alias “Andy,” and FEI JIANG, known as “Jeffrey” or “Brother Fei.” These arrests relate to their alleged involvement in an intricate cryptocurrency scheme to steal and launder millions of dollars from various financial institutions, resulting in the misappropriation of over $10 million.
Arrests and Legal Proceedings
GAO and JIANG were arrested earlier today and are scheduled to appear before U.S. Magistrate Judge Robert W. Lehrburger. Simultaneously, XU, apprehended in Oklahoma, will face charges in the U.S. District Court for the Eastern District of Oklahoma, with U.S. District Judge Colleen McMahon presiding over the case.
U.S. Attorney and FBI’s Warning
U.S. Attorney Damian Williams emphasized the gravity of the situation, stating, “For years, Zhong Shi Gao, Naifeng Xu, and Fei Jiang allegedly participated in a complex scheme to steal over $10 million from nearly a dozen U.S. banks and financial institutions. They converted the stolen funds into cryptocurrency and moved them to foreign cryptocurrency exchanges. These charges should serve as a stern warning to fraudsters and cybercriminals who believe they can use cryptocurrency to hide their identities. Alongside our partner agencies, we will find you and hold you accountable for your crimes.”
FBI Assistant Director in Charge James Smith added, “Gao, Jiang, and Xu were arrested for allegedly stealing and laundering more than $10 million dollars by scamming multiple financial institutions and using foreign cryptocurrency exchanges. Schemes like this harm institutions and make it tougher to report suspicious transfers. The arrests today serve as a warning to anyone thinking of attempting to engage in bank fraud. The FBI will hold you accountable in the criminal justice system.”
Details of the Alleged Scheme: Modus Operandi and Recruitment
According to the unsealed indictment in Manhattan federal court, between at least 2018 and 2022, GAO, XU, and JIANG participated in a scheme with others to steal millions of dollars from financial institutions. The scheme involved orchestrating transfers of funds between accounts they controlled, followed by falsely reporting these transfers as unauthorized. This deceptive practice led the financial institutions to credit them the amount of the transfers.
The modus operandi included recruiting foreign nationals, primarily from China and Taiwan temporarily residing in the United States, to open bank accounts. Control over these accounts would then be handed over to the scheme’s orchestrators.
Funds were deposited and transferred between controlled bank accounts. Subsequently, fraudulent reports claiming unauthorized wire transfers were filed, prompting the banks on both ends of the wire transfer to credit the accounts with the transferred funds temporarily.
Swift Withdrawals and Cryptocurrency Conversion
Despite the unauthorized claims, GAO, XU, JIANG, and others retained control over the funds. The credited funds were swiftly withdrawn as cash or converted into cryptocurrency and moved to foreign exchanges before the banks detected the fraudulent reports. This resulted in the withdrawal of nearly double the initially deposited money, leaving the bank accounts with negative balances.
In total, the accused are responsible for over $10 million in actual losses to nearly a dozen banks and financial institutions.
ZHONG SHI GAO, 31, of Flushing, New York; NAIFENG XU, 37, of Guthrie, Oklahoma; and FEI JIANG, 41, of Brooklyn, New York, each face charges including bank fraud conspiracy, conspiracy to commit wire fraud affecting a financial institution, money laundering conspiracy, and aggravated identity theft.
The charges carry maximum sentences ranging from 20 to 30 years in prison. The FBI’s Asian and African Organized Crime Squad conducted the investigative work with assistance from the FBI Field Office in Oklahoma City. The case is being handled by the Office’s Violent & Organized Crime Unit, with Assistant U.S. Attorneys Andrew K. Chan, James Ligtenberg, and Ni Qian leading the prosecution.
It’s important to note that the charges in the indictment are accusations, and the defendants are presumed innocent unless proven guilty in a court of law.
Please find the U.S. v. Gao et al Indictment in this attachment.
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