Owners of Underground, International Financial Institutions Sentenced for Operating Unlicensed Money Transmitting Business

SAN DIEGO ­–Lei Zhang of Las Vegas, Nevada, was sentenced in federal court yesterday to 15 months in prison and the forfeiture of $150,000 for operating an unlicensed money transmitting business.

Zhang is believed to be the first individual in the United States sentenced for his role in developing a new form of unlawful underground financial institution that transfers money between the United States and China, thereby circumventing domestic and foreign laws regarding monetary transfers and reporting, including United States anti-money laundering scrutiny and Chinese capital flight controls.

As set forth in court documents, Zhang would collect U.S. dollars (in cash) from various third-parties in the United States and deliver that cash to a customer, typically a high-roller gambler from China who could not readily access cash in the United States due to capital controls that limit to $50,000 per year the amount of Chinese currency an individual can convert to foreign currency. Upon receipt of the U.S. dollars, the gambler would transfer the equivalent value of Chinese yuan (using a banking app) from the customer’s Chinese bank account to a Chinese bank account designated by defendant Zhang. For facilitating these transactions, Zhang was paid a commission based on the monetary value illegally transferred. 

Zhang further admitted that he was regularly introduced to customers by casino hosts, who sought to increase the gambling play of the casino’s customers.  By connecting cash-starved gamblers in the United States with Zhang’s illicit money transmitting businesses, the casinos increased the domestic cash play of their China-based high-roller customers.  All a gambler needed was a mobile device with remote access to a China-based bank account.  As a result, Zhang managed to transmit and convert electronic funds in China into hard currency in the United States, all while circumventing the obstacles imposed both by China’s capital controls and the anti-money laundering scrutiny imposed on all United States financial institutions. For their efforts, the casino hosts often received a cut of Zhang’s commission.  

“The groundbreaking work by these investigative agents in identifying and ferreting out this new form of illicit money transmittal cannot be overstated,” noted Acting U.S. Attorney Randy Grossman.  “Prosecuting global money laundering is a priority for the U.S. Attorney’s Office.”

Special Agents from Homeland Security Investigations, IRS Criminal Investigation Las Vegas Financial Crimes Task Force, and the Drug Enforcement Administration led the investigation into Zhang’s operations.  

DEFENDANT                                               Case Number 20-CR-370-WQH                             

Lei Zhang                                                        Las Vegas, NV             Age: 41

SUMMARY OF CHARGES

Operation of Unlicensed Money Transmitting Business – Title 18, U.S.C., Section 1960

Maximum penalty: Five years in prison and $250,000 fine

AGENCIES

Homeland Security Investigations

IRS Criminal Investigation Las Vegas Financial Crimes Task Force

Drug Enforcement Administration