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Source of screenshots circulated in the currency circle community: currency breaking news

On July 2, the self-media Wu Shuo Blockchain issued an article stating that Zhao Dong was taken away by the Hangzhou police for investigation in the early morning of June 24. The reason is likely to be related to OTC transactions and "suspected of concealing criminal proceeds."

On the same day, the staff of RenrenBit also responded to the media that due to the recent "freezing card tide in the currency circle", an OTC team that Zhao Dong participated in the investment was involved in suspected fraudulent fund transactions and was cooperating with the police in investigating and collecting evidence.

The so-called OTC refers to a transaction completed through one-on-one private negotiation between buyers and sellers outside the exchange.

In layman's terms, it means "pay with one hand and pay with one hand".

In addition, most major exchanges and wallets also have their own OTC trading areas. Here, OTC merchants can directly trade with speculators.

In China's OTC circle, Zhao Dong can be regarded as a pioneer.

"Zhao Dong's reputation in the OTC circle is quite good. He was the first to do OTC among the group of 'coin circle bigwigs', and he is also one of the most well-known OTC merchants in the circle." Wang Fang told Yiben Blockchain.

According to public information, like other bigwigs in the currency circle in the early years, Zhao Dong speculated on coins and opened a mine, but all ended in failure. At one point, he owed a debt of 60 million yuan due to the explosion of currency speculation. And he was able to stand up in the end, relying on OTC transactions.

In August 2015, Zhao Dong posted on Weibo that he achieved a transaction volume of 30 million within a month, and the transaction fee was 2%.

Based on this calculation, relying on off-market transactions, he can earn 20,000 yuan a day.

The over-the-counter transaction records he posted showed that among the transactions he handled, there were both large orders of 800 bitcoins and small orders of 0.02 bitcoins.

A player who had conducted OTC transactions with Zhao Dong pointed out that Zhao Dong had asked him to provide a series of information including front and back photos of ID card, photo of ID card in hand, bank card photo and address information, and sometimes even video verification to confirm his identity.

In fact, Zhao Dong has long attracted the attention of regulators.

In May 2018, CCTV2 reported on the national Internet financial risk analysis technology platform in "Simultaneous Broadcasting Survey Three Questions Blockchain". It can monitor multiple digital currency trading platforms.

In the report video about the platform, an ID named "zhaodong1982" appeared many times.

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Screenshot of National Internet Financial Risk Analysis Technology Platform

According to the data, the account was registered in 2014 and has completed more than 1,000 transactions so far, with the number of transactions reaching 602 people.

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In the currency circle, what kind of world is the OTC trading market?

First of all, its trading volume is not decimal.

In April 2018, Bloomberg quoted data from the consulting agency TABB Group as saying that the single-day trading volume of the global digital currency OTC market fluctuated between 250 million and 30 billion U.S. dollars, while in the same period, the real trading volume in the digital currency market was about 150 million dollars per day. One hundred million U.S. dollars.

"The consensus in the market is that the OTC trading volume of digital currency is much greater than the trading volume on the floor, and the former should be 1.5 times to 3 times that of the latter." In July 2019, Harry Zhou, co-founder of the US OTC trading platform KoiTrading, told the media.

Second, the circle is quite secretive.

"OTC is a small circle. It is estimated that there will be no more than 1,000 domestic OTC merchants." Wang Fang told Yiben Blockchain, "The big players in the circle all have more than 8 figures of liquidity in their hands."

Wang Fang pointed out that these merchants can be divided into two categories:

The first category mainly serves large customers. Most of them trade through WeChat groups. The groups are all acquaintances, and the transaction risk is not high. "There are not many businesses in this category."

The second category is mainstream OTC merchants. Most of them are attached to large platforms such as exchanges and wallets, and directly trade with ordinary coin speculators.

In this case, they can easily receive black money.

"99% of OTC merchants do not have the ability to identify black money. As long as they grow bigger, they will encounter black money sooner or later." Wang Fang said.

They will warn customers that they have "connected to the public security system" or purchased an "anti-money laundering system". Once black money is found, the system will immediately call the police.

But Wang Fang said that such claims are bluffing.

"OTC is always on the fringes of the law. How can it be connected to the public security? Anti-money laundering is an internal system of the public security and the central bank, and it cannot be bought outside."

Li Wen, an OTC merchant, said that some customers themselves do not know the source of their funds is unknown, and OTC merchants may be implicated as a result.

She said that what she can do is to ensure the authenticity of the customer's identity through various KYC methods. Once black money is encountered, the information will be submitted to the public security organs to speed up the progress of case investigation.

"In the OTC industry, there are still some merchants who take risks for profit and actively provide services for criminals." Wang Fang said.

What crimes will they be convicted of?

"OTC merchants in the currency circle participate in money laundering and are mainly involved in money laundering crimes." Zhang Feng, a partner of Wanshang Tianqin Law Firm, told Yiben Blockchain.

China's criminal law stipulates that those who commit the crime of money laundering shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention; if the circumstances are serious, they shall be sentenced to fixed-term imprisonment of not less than five years but not more than ten years. In addition, illegal gains will be confiscated and a fine of more than 5% and less than 20% of the money laundered will be imposed.

Zhang Feng pointed out that the crime of money laundering must be intentional. If the perpetrator does not know that the money comes from criminal illegal proceeds and its proceeds when handling the money, and mistakenly believes that it is property from a legal source, it does not constitute a crime.

Supervision

Supervision

In fact, as early as around 2019, supervision has been stepping up the crackdown on money laundering through OTC transactions.

In January 2019, Li, an OTC merchant, stated in a WeChat group that he encountered black money when conducting OTC transactions on the Huobi platform, and was detained by the Yunnan police for 30 days and released on bail pending trial.

He said that the total amount of this problematic transaction was 130,000 yuan, and the other party paid in real name.

"This money is already in my fourth hand. The third hand was caught when I was detained for half a month. He laundered money." He said.

In October 2019, Alipay and WeChat, the two major payment giants in China, announced at the same time that virtual currency transactions were prohibited on the platform. Once the above-mentioned behaviors were discovered by users, the payment and payment function of the account would be closed.

At that time, Binance founder Zhao Changpeng also said on Twitter that Binance OTC would support Alipay and WeChat transactions, but soon, Alipay officially left a message under this Twitter: "No, you can't."

And 2020 can be described as the year when regulators crack down on OTC.

In April 2020, the Shandong Yuncheng People's Court concluded an OTC money laundering case. The defendant Zhou sold more than 600,000 USDT to a telecom fraud suspect. He was sentenced to 6 months in prison for covering up and concealing criminal proceeds. A fine of 30,000 yuan was imposed.

The court found evidence that Zhou was suspected of money laundering. The market price of USDT at that time was 7.11-7.13 yuan. Zhou’s purchase price was 7.12 yuan, but the price he sold to the telecom fraud suspect was 7.39 yuan, which was much higher than the market price.

In addition, starting from March 2020, there has been a wave of frozen cards in the currency circle-the bank cards of some merchants and players participating in OTC transactions have been frozen one after another.

In March 2020, a Weibo netizen said that he sold coins through the Huobi OTC trading area on March 9 and cashed out 50,000 yuan. The next day, his bank card was frozen, and the OTC merchant he traded with was also lost.

"Southern Metropolis Daily" reported that on May 18, Guangzhou Baiyun police held a press conference to publicize a case involving the use of virtual currency OTC transactions for money laundering, and 12 suspects were arrested.

In early June, another group of OTC merchants and coin speculators reported that their bank cards were frozen.

"A new wave of frozen cards is coming." The entire OTC community was in panic.

In July, after the news of "Zhao Dong was arrested", the OTC circle was even more shaken. "Many OTC merchants are afraid to accept large new orders."

Recently, some people in the currency circle said that some players who bought coins were frozen again.

In fact, the national Internet financial risk analysis technology platform has already opened up data with multiple trading platforms and monitored multiple currencies.

Once black money appears on the OTC trading platform, the regulatory authorities can confirm the relevant responsible persons in the first place.

OTC transactions known as "money laundering hotbeds" are no longer outside the law.

"A more severe crackdown on OTC in the currency circle is coming." A person familiar with the matter revealed.

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