Three people, including two Chinese nationals, were arrested Tuesday for allegedly using shell companies to launder more than $13 million taken in investment scams called “pig butchering.”
Mingzhi Li, 24, aka “Zheng Lin,” and Zeyue Jia, 23, aka “Jiao Jiao Liu,” both of downtown Los Angeles; and Jun Shi, 55, of San Gabriel, made their initial appearances in U.S. District Court in Santa Ana Tuesday afternoon, the U.S. Department of Justice said in a news release.
The scam involves thieves targeting victims who are “gradually lured into making increasing monetary contributions, generally in the form of cryptocurrency, to a seemingly sound investment before the scammer disappears with the contributed monies,” according to the FDIC.
In this case, Shi is accused of setting up the companies Magic Location Trading LLC and Stone Water Trading LLC in 2022 to serve as “money service businesses that were formed for the purpose of remitting funds on behalf of third-party customers to other entities,” though they were never registered with the Financial Crimes Enforcement Network or the State of California, as required under federal law, prosecutors said.
Bank accounts set up by Li and Jia “received funds from investment fraud victims” through dozens of wire transfers, with more than $7.6 million going to Stone Water and $5.4 million going to Magic Trading, prosecutors said.
Prosecutors said the trio then transferred the money to other accounts or overseas, sent it to individuals or used it for personal expenses — even though victims could see their fake investments in “commodities such as gold contracts or virtual currency such as Bitcoin” on the web or a mobile app.
“Once funds are sent to scammer-controlled accounts, the purported investment platform often falsely shows significant gains on the purported investment, and the victims are thus induced to send more money for additional investments,” the release said.
That money, however, was gone.
The DOJ provided the example of a 72-year-old man from Minnesota who “invested” in a digital platform called Enkuu by sending $75,000 to Stone Water and $250,000 to Magic Trading the month after that.
“He later was unable to withdraw any of his money from ‘Enkuu,'” prosecutors said.
Li and Jia, both citizens of China who came to the U.S. on student visas that are now expired, have been jailed without bail. Shi was released on $20,000 bond.
Each faces charges of operating an unlicensed money-transmitting business, which carries a maximum penalty of five years in federal prison.
Arraignment is scheduled for March 17.
