Why China was so keen to get to alleged cybercrime boss Chen Zhi first - Bangkok Post

Cambodia handed Chen Zhi to Chinese authorities early this month. (Illustration: Henry Wong/South China Morning Post) When a film about an investigation into a phone scam in Cambodia debuted at the Busan International Film Festival in 2018, it was not the cast or the plot that drew attention in China.

Instead, the focus was on the film's executive producer, Chen Zhi - a billionaire Chinese businessman who has himself been accused of running a sprawling online scam network in Cambodia.

In The Prey - touted as Cambodia's "first million-dollar action movie" - an undercover Interpol operative ends up in jail.

But in real life, Chen is now in custody. He has been charged with the crimes of "operating a casino, fraud, illegal business operation and concealing criminal proceeds", according to Chinese police.

Chen was arrested in Cambodia and extradited to China earlier this month, along with two other Chinese nationals.

State television aired footage of Chen arriving in China. In a scene that could have been from a movie, the 38-year-old was shown handcuffed and with a black hood over his head as he was led off a China Southern plane by armed police.

The hood was then removed to reveal Chen's face for the cameras - film investor, crypto tycoon, and a suspect in multiple transnational crimes.

What happens next will be closely watched around the world, given that a number of countries have taken action against Chen.

In October, the United States charged him with wire fraud conspiracy and money laundering. US law enforcement also seized about US$15 billion worth of bitcoin it alleged belonged to Chen.

He has been sanctioned by both the US and Britain.

Meanwhile, governments across Asia - including Singapore, South Korea, Hong Kong and Taiwan - have also seized assets or detained individuals related to Chen's conglomerate, Prince Holding Group.

When Chinese police got hold of Chen, they hailed it as "another great achievement in China-Cambodia law enforcement cooperation". Cambodian authorities said they had worked with Chinese investigators on the case for months.

Chen's capture was also hailed during a top annual security meeting in Beijing, according to a Chinese police statement on Wednesday.

Observers noted that Beijing was keen to get to Chen first, with many of the alleged fraud victims in the case in China and because he had links with Chinese state-affiliated firms in the region.

But the case is expected to be complicated since it involves accusations of cross-border crimes and illegal cryptocurrency gains, and observers noted that investigators were likely to have to work with other countries, including the US.

Born in 1987 in a Fujian fishing village, Chen's first business venture was an internet cafe in the provincial capital Fuzhou. He was also an advertising agent for a South Korean video game, according to a Caixin magazine report.

He moved to Cambodia in the early 2010s and established Prince Group, which expanded from real estate to banking and operating a casino.

He became a Cambodian citizen in 2014.

Prince Group has been linked to multiple criminal trials in China over the past decade, according to court documents in the China Judgments Online database.

Chinese nationals sentenced in those cases testified that the group ran gambling companies and had opened bank accounts in China, but Chen was not mentioned in any of the cases.

One cross-border internet gambling case handled by county prosecutors in Guangyuan, Sichuan province, involved illicit gains of 5 billion yuan (US$718 million). Some 124 people were jailed in 2023 over that case, with prison terms ranging from six months to seven years.

Among those jailed was a person identified only by their surname Yuan, who opened an online gambling company in 2016 "with stakeholders of the Prince Group" that targeted Chinese citizens, according to the official Sichuan Legal News.

It said Yuan had made huge illicit gains and started a money laundering chain to divert cash to China.

Prosecutors said the gambling syndicate ran games such as mahjong and poker, particularly Texas Hold'em, and it had a back-end management channel where the ratio of wins and losses was controlled. The syndicate profited by deducting a "tax" from the winnings of each game played and through service fees.

In August 2019, then-Cambodian prime minister Hun Sen abruptly announced a total ban on online gambling.

That prompted some operators to pivot "directly to the more lucrative business of fraud", according to Ling Li, a researcher at the University of Melbourne's Centre for Contemporary Chinese Studies.

"There has always been a high degree of overlap between online gambling and online fraud, with both often operating within the same industrial parks," Li wrote in a paper last year.

Meanwhile, Chen's wealth was helping him gain standing in Cambodia. He was given the honorific "Neak Oknha" - meaning prominent tycoon - in 2020, the highest title bestowed by Cambodia's king. It requires a donation to the government of at least US$500,000.

American authorities believe Chen's influence extended well beyond Cambodia. The US Department of Justice in October alleged that Chen and his executives had used their political influence in "multiple foreign countries" to protect their criminal enterprise, and that they bribed public officials to avoid disruption by law enforcement.

Chen's group has been portrayed by some Chinese state media outlets since the 2010s as a supporter of the Belt and Road Initiative, Beijing's trade and infrastructure push that spans Asia, Africa and Europe.

Prince Real Estate Group executive chairman Qiu Guoxing, who is also reportedly a relative of Chen's, told official newspaper Shenzhen Special Zone Daily that he started the business in Cambodia in response to the belt and road strategy.

In addition, several building projects carried out by Chen's business empire involved Chinese state-owned construction firms, according to official reports. They include the Prince Group headquarters in Phnom Penh, which won a national Chinese construction prize in 2020.

Xu Peng, a postdoctoral researcher at the Centre for the Study of Illicit Economies, Violence and Development at SOAS University of London, said Chen's early links to Chinese investment in the region were likely to be a reason Beijing wanted him extradited.

"If his rise to riches had something to do with Chinese investment in Southeast Asia, then if Cambodia sends this man to the West instead of to China, it would cause bigger damage for China," Peng said.

China's crackdown on cross-border criminal activities in Southeast Asia has intensified in the past decade.

In 2018, Chinese and Cambodian law enforcement agents met in Phnom Penh and agreed to set up a cooperation mechanism to tackle cross-border gambling, telecoms fraud and other cybercrime activities.

The following year, Chinese authorities said a six-month campaign by police from the two countries had led to the arrest of 176 suspects.

Over the next few years, Chinese police transferred many suspects back to China from Cambodia in cases involving drugs, fraud and human trafficking, according to media reports. Some 800 suspects were transported on two chartered flights in 2024.

Beijing set up a special task force to investigate cross-border crimes in 2020, and Prince Group was among those in the crosshairs, according to a Caixin report. That resulted in the arrest of 458 suspects related to the group who were accused of providing payment and settlement services for its online casino.

Cambodia announced on Jan 8 that it had handed Chen to Chinese authorities and that his Cambodian nationality had been revoked in December.

Peng from SOAS said the extradition was "a smart move for Cambodia, because if Chen was sent to the UK or the US, it would have done nothing for Cambodia's bilateral relations with China".

Wang Jiangyu, a law professor at City University of Hong Kong, said Cambodia clearly wanted to distance itself from the tycoon.

"At the current stage, Chen can only bring damage to Cambodia's reputation," he said. "Whether he changes nationality or not, it doesn't matter to China."

According to Zhang Qingfang, a legal expert based in Beijing, the number of Chinese caught up in telecoms scams in recent years had made it a pressing issue for China.

He said there were still many victims in China and similar scam cases persisted, which meant Beijing had an urgent need to actively pursue the matter.

Chinese authorities will now have to unknot a series of legal issues in the cross-border case, including tracking down Chen's digital assets.

Zhang said a lot of evidence in the case would have to be investigated in Cambodia or elsewhere, and that would require cooperation between countries. There was also the difficulty of victims and witnesses testifying from other countries.

But China does have experience in extraditing suspects from Southeast Asian nations. In another recent high-profile case, alleged gambling kingpin She Zhijiang was transferred from Thailand in November, accused of operating illegal casinos in China.

Zhang said another issue in Chen's case would be the question of how to deal with any illegal proceeds in cryptocurrency.

China does not recognise cryptocurrencies as legal tender.

In November, the central bank renewed a pledge to stamp out "illegal activities" involving virtual currencies - including all cryptocurrencies like bitcoin and stablecoin.

It said there was a risk they could be "used for illegal activities such as money laundering, fundraising fraud and illicit cross-border capital transfers".

Technically this means any dealing or transaction of cryptocurrencies is illegal in mainland China.

But Chinese authorities have been quietly exploring how to deal with this conundrum as they handle more cases involving cryptocurrencies.

Liu Zhiqiang, a lawyer at the Beijing-based Yingke Law Firm, said there had been instances in Beijing and Shanghai last year where police had seized virtual assets - mainly bitcoin - in criminal cases.

He said they had entrusted appraisers to assess the value of the virtual assets and sent them to licensed trading institutions outside the mainland, in Hong Kong.

Liu said the assets had then been sold and the proceeds repatriated - either to be confiscated as state revenue or returned to the victims.

According to Zhang, Chen's case might prove more complicated since the US had seized a large amount of his cryptocurrency assets, but he was now in custody in China.

"It'll be interesting to watch how China and the US will cooperate in this case," he said. "If China doesn't cooperate, it will be extremely difficult for the US to investigate Chen."

Liu noted the case of convicted Chinese "cryptoqueen" Qian Zhimin, who was jailed for 11 years and eight months by a London judge in November.

Qian was found guilty of scamming more than 40 billion yuan worth of bitcoin from 126,000 investors between 2014 and 2017. She had then attempted to launder the proceeds in Britain.

"Chinese and British law enforcement cooperated on the case in order to determine how to deal with the bitcoin, exchange them for cash and return the proceeds to victims in China," Liu said.