Three Men Arrested For Complex Bank Fraud And Cryptocurrency Laundering Scheme

Damian Williams, the United States Attorney for the Southern District of New York, and James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of ZHONG SHI GAO, a/k/a “George,” NAIFENG XU, a/k/a “Andy,” and FEI JIANG, a/k/a “Jeffrey,” a/k/a “Brother Fei,” for charges in connection with a scheme to steal and launder millions of dollars from financial institutions, which resulted in the theft of over $10 million.  GAO and JIANG were arrested this morning and will be presented today before U.S. Magistrate Judge Robert W. Lehrburger.  XU was arrested in Oklahoma and will be presented in the U.S. District Court for the Eastern District of Oklahoma.  The case is assigned to U.S. District Judge Colleen McMahon.

U.S. Attorney Damian Williams said: “For years, Zhong Shi Gao, Naifeng Xu, and Fei Jiang allegedly participated in a complex scheme to steal over $10 million from nearly a dozen U.S. banks and financial institutions, which they converted into cryptocurrency and moved to foreign cryptocurrency exchanges.  These charges should serve as a warning to fraudsters and cybercriminals who think they can turn to cryptocurrency to hide their identities – together with our partner agencies, we will find you and hold you accountable for your crimes.”

FBI Assistant Director in Charge James Smith said: “Gao, Jiang, and Xu were arrested for allegedly stealing and laundering more than $10 million dollars by scamming multiple financial institutions and using foreign cryptocurrency exchanges.  Schemes like this harm institutions and make it tougher to report suspicious transfers.  The arrests today serve as a warning to anyone thinking of attempting to engage in bank fraud. The FBI will hold you accountable in the criminal justice system.” 

According to the allegations in the Indictment unsealed today in Manhattan federal court:[1]

Between at least in or about 2018 and in or about 2022, ZHONG SHI GAO, a/k/a “George,” NAIFENG XU, a/k/a “Andy,” and FEI JIANG, a/k/a “Jeffrey,” a/k/a “Brother Fei,” participated in a scheme with others to steal millions of dollars from financial institutions by causing transfers of funds between accounts they controlled, then falsely and fraudulently reporting that the transfers were unauthorized, which induced the financial institutions to credit them the amount of the transfers.  The scheme proceeded in the following manner:

 First, GAO, XU, JIANG, and other members of the scheme would recruit other people — frequently foreign nationals from China and Taiwan temporarily residing in the United States — to open bank accounts at various bank branches in the New York City metropolitan area and elsewhere.  Control over these bank accounts would then be given to GAO, XU, JIANG, and other members of the scheme. 

Second, GAO, XU, JIANG, and other members of the scheme would arrange for funds to be deposited and transferred between bank accounts controlled by members of the scheme.  Next, GAO, XU, JIANG, and other members of the scheme would cause fraudulent reports to be filed with the banks claiming that these wire transfers were unauthorized.  This prompted the banks — both the bank issuing the wire transfer and the bank receiving the wire transfer — to temporarily credit the accounts in the amount of the transferred funds, effectively doubling the amount of money initially deposited into these accounts, even though GAO, XU, JIANG, and other members of the scheme had in fact authorized the transfers and maintained control over the transferred funds all along. 

Finally, GAO, XU, JIANG, and other members of the scheme would arrange for the credited funds to be quickly withdrawn as cash or converted into cryptocurrency and moved to foreign cryptocurrency exchanges before the banks realized that the unauthorized-transfer reports were fraudulent.  This resulted in GAO, XU, JIANG, and other members of the scheme withdrawing nearly double the money initially deposited while leaving the bank accounts with negative balances.

In total, GAO, XU, JIANG, and other members of the scheme are responsible for over $10 million in actual losses to nearly a dozen banks and financial institutions.

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ZHONG SHI GAO, 31, of Flushing, New York; NAIFENG XU, 37, of Guthrie, Oklahoma; and FEI JIANG, 41, of Brooklyn, New York, are each charged with one count of bank fraud conspiracy, which carries a maximum sentence of 30 years in prison; one count of conspiracy to commit wire fraud affecting a financial institution, which carries a maximum sentence of 30 years in prison; one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison to be served consecutively to any other sentence imposed. 

The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Williams praised the investigative work of the FBI’s Asian and African Organized Crime Squad.  Mr. Williams also thanked the FBI Field Office in Oklahoma City for their assistance in the investigation of this case.

This case is being handled by the Office’s Violent & Organized Crime Unit.  Assistant U.S. Attorneys Andrew K. Chan, James Ligtenberg, and Ni Qian are in charge of the prosecution.

The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.