China has jailed five operators of a payment service called “Sifang” for running a USDT-backed online gambling payment network that moved roughly 2.95 billion yuan (~$428 million).
Key facts
- On June 26 the Intermediate People’s Court of Xilin Gol League in Inner Mongolia upheld the convictions of five defendants in the Sifang case. Sentences range from three to six years; fines include 3 million yuan for one defendant (Ma) and smaller fines for others. The court ordered authorities to recover 2.95 million yuan in illegal income from Ma.
- Courts say the group processed illegal payments between May 24, 2022 and Oct. 18, 2023 using USDT wallets, bank cards and third‑party payment accounts. The operation routed funds through 105 merchant accounts tied to 10 third‑party payment firms and commissioned 32 collection/payment platforms.
- Sifang acted as a “fourth‑party” or aggregated payment service: it combined multiple bank and third‑party payment interfaces so gambling sites could receive funds through a single system, but it was not a licensed payment provider.
How the scheme worked
- Prosecutors say the five operators built the infrastructure in May 2022 after learning payments for gambling platforms could be lucrative. They rented overseas servers, coordinated with overseas gambling operators, and used intermediaries to open merchant accounts at established payment firms.
- Zhu and Zhang allegedly managed payment routes, coordinated with third‑party providers, handled complaints and distributed profits. Ma is accused of introducing payment channels, supplying merchant registration materials and helping merchants open accounts; he also handled intermediaries and operational problems.
Blockchain evidence and money flows
- Court records show large volumes of USDT moved through identified wallets: one wallet linked to Zhang received 4.146 million USDT across 485 deposits (valued in the records at ~26.95 million yuan); another wallet sent 4.097 million USDT through 497 transfers. Zhu, Zhang and Du are said to have converted 1.905 million USDT into cash across 11 offline transactions (valued at ~12.38 million yuan).
- For Ma, the court used data from the OKX app showing 152 transfers totaling 719,176.7 USDT into a wallet he supplied (valued at about 4.67 million yuan). After deductions, the court recognized 2.95 million yuan as Ma’s illegal proceeds.
- Investigators obtained wallet addresses from Tether and transaction details from OKX while building the case.
Legal arguments and evidentiary limits
- Prosecutors framed the activity as unlicensed payment settlement and charged the defendants with illegal business operations. They initially alleged the group earned 42.85 million yuan by taking a 1.45% commission on merchant transfers tied to overseas gambling sites; courts ultimately attributed smaller profit amounts to some defendants.
- Defense lawyers contested aspects of the blockchain evidence: Ma’s lawyer argued investigators hadn’t established how many payment accounts Ma actually handled or explained the purpose of more than 100 USDT transfers. An East China University of Political Science and Law associate professor, Wang Xiaohua, told The Paper that linking traceable blockchain transfers to real people remains difficult when tokens don’t pass through exchanges that hold identifying records. The Xilin Gol court did not respond to the publication’s questions about evidence valuation and cross‑border data collection.
Wider context: enforcement, law, and unresolved gaps
- The ruling arrives amid increasing scrutiny of crypto‑linked money laundering in China and calls from legal scholars and prosecutors for clearer rules. A July article in the People’s Procuratorate Daily highlighted criminal liability definitions, evidence collection and asset recovery as persistent problems under China’s current framework.
- Prosecutors and academics have noted that crypto’s anonymity, decentralization and cross‑border nature complicate investigations and underscore inconsistencies between China’s revised Anti‑Money Laundering Law and Article 191 of the Criminal Law.
- China’s Supreme People’s Procuratorate reported that more than 1,200 people were prosecuted for drug‑related money laundering between January 2025 and May 2026. In one high‑profile case prosecutors said a trafficker laundered over $7 million through crypto; the trafficker received a death sentence for multiple drug convictions (the sentence was not imposed solely for money laundering).
Why it matters for crypto and payments
- The Sifang case highlights how “fourth‑party” payment aggregators can be used to funnel funds into illicit online activity, and it shows authorities combining traditional financial oversight with blockchain analytics and cooperation from crypto platforms. At the same time, defense challenges and expert commentary show that tracing crypto to individuals remains legally and technically complex—fueling calls for clearer statutory guidance on evidence, cross‑border data access and asset recovery.
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