Scandal Kuaishou Bitcoin shock: millionaire inside job shakes China

140 million yuan vanished from Kuaishou’s accounts and laundered into Bitcoin shake the Chinese tech world: the case exposes the dark side of decentralization, even where crypto is prohibited by law.

How was the crypto fraud carried out inside Kuaishou?

According to the investigations, Kuaishou, a giant in short videos and the main rival of TikTok in China, has suffered a loss of 140 million yuan (about 20 million dollars). The hit was carried out by a true “internal crew”: eight employees of the platform, led by a man identified as Feng, orchestrated the outflow of funds from the company’s financial streams.

The protagonists used an elaborate strategy: first the use of desk OTC (Over-The-Counter) to convert the stolen capital into Bitcoin, then the use of mixing services – tools that “mix” transactions to make them untraceable – and finally a series of multi-hop wallets, or transit wallets to further disguise the path of the digital money.

Why does the Bitcoin-Kuaishou case make so much noise?

The magnitude of the blow is titanic, especially in a country where the crackdown on crypto has been total since 2021. Since the absolute ban imposed by Beijing, all forms of mining, trading, and exchanges with foreign entities are prohibited. Yet, the news shows how Bitcoin and other crypto remain preferential tools for those who want to circumvent controls: even at the top of tech companies.

The case has been defined as “a textbook example of small officials with big corruptions”: not big bosses, but mid-level staff who use technological know-how to bypass the nets of internal controls. All this, using the pseudo-anonymity guaranteed by assets like Bitcoin and mixing services.

How were the responsible parties discovered? The role of blockchain analysis

Despite the sophisticated techniques adopted by the protagonists – OTC desk, mixing, multi-hop wallet – the blockchain analysis and the cooperation between international law enforcement agencies managed to recover a significant portion of the loot. In particular, the police tracked and seized about 92 BTC, with an approximate value of 11.7 million dollars.

The investigation required an unprecedented collaboration between specialized analysts in cryptocurrency tracking and Chinese authorities, committed to combating cross-border crime related to digital laundering. The ability to trace the movement of funds has set a precedent, highlighting both the limitations and advantages of blockchain infrastructure for the fight against financial crime.

Who are the responsible parties and what penalties have been imposed?

At the center of the embezzlement network is Feng, an employee of Kuaishou who coordinated the entire transfer of capital from the company to the crypto wallets. Together with seven accomplices, Feng was tried and convicted for embezzlement: the prison sentences range from three to fourteen years.

The case represents one of the most serious internal scandals for a Chinese big tech from the point of view of the illicit use of crypto, and marks a turning point for corporate supervision in the digital era.

What does this case reveal about crypto and financial crime in China?

The Bitcoin-Kuaishou case demonstrates that, despite the total ban on crypto in China in effect since September 2021, the phenomenon of ownership, use, and laundering of digital assets is far from eradicated. Authorities must now face a new wave of “white-collar” crimes, often more difficult to detect compared to classic cases of corruption or traditional fraud.

Furthermore, the incident casts a sinister light on the effectiveness of internal controls in large tech groups: a small group of insiders with digital skills is enough to carry out million-dollar appropriations by circumventing barriers often considered “infallible”.

The case also raises crucial questions about the attractiveness of assets like Bitcoin in more restrictive environments, as well as about the new tools adopted for laundering: OTC desk, mixer, multi-hop wallet become the rule, no longer the exception.

What consequences for the tech industry and Chinese regulation?

After the Kuaishou scandal, the pressure on controls, audits, and internal monitoring in Chinese tech companies will become much more intense. Companies will need to strengthen surveillance on digital transactions and fund management, while the Government might extend international collaboration on blockchain traceability.

Furthermore, the case urges the authorities to accelerate the development of investigation tools and new policies to reduce the ease of converting fiat currencies into crypto through clandestine channels. The challenge, however, will be to find a balance between a policing eye and innovation, in a constantly evolving sector that remains central to Chinese competitiveness.

The future: can everything change after the Kuaishou-Bitcoin scandal?

The operation that unveiled the cyber-heist in the Kuaishou accounts represents a true point of no return for the Chinese tech sector, and highlights how Bitcoin and the blockchain, although monitored, can become double-edged weapons.

In the near future, a further barrage of controls and increased attention to possible digital laundering processes orchestrated by insiders is expected. The response from companies and authorities will be crucial: everything can change in the coming weeks. Follow the updates to discover how the challenge between technology, crime, and regulation will evolve in the heart of the new digital China.