Nikkei Asia: Chinese Companies Suspected of Using Japanese Bases for Cryptocurrency Scams

NEW YORK/TOKYO (CNA) - Nikkei Asia reports that, according to its independent investigation, a Chinese organization suspected of illegally exporting chemical precursors for the synthetic opioid fentanyl is allegedly involved in large-scale cryptocurrency scams using Japan as a base.

The report indicates that the organization used Japanese domain names and is suspected of defrauding numerous ordinary cryptocurrency investors of funds. Evidence suggests frequent transactions between this organization and entities sanctioned by the United States, pointing to a potentially broader organized crime network behind it.

According to the investigation, the core of the organization suspected of engaging in financial crimes in Japan is the Chinese chemical company Hubei Jingao Biotechnology Co., Ltd. U.S. law enforcement agencies have been taking action against it, and two of the company's senior executives were convicted in the U.S. last year.

In late May, a senior official from the U.S. Drug Enforcement Administration (DEA) stated that Japan is considered a transit point for fentanyl smuggling. Compared to many countries, Japan has less stringent inspections of commercial goods destined for the United States, making it an ideal transit center for drug precursors produced in China and India.

Firsky, a company in Nagoya under Jingao Biotech, served as the organization's operational base in Japan. An individual known as the "Japanese boss" was responsible for local logistics and fund management. Firsky was dissolved in July 2024.

There are growing concerns that Japanese bases may not only be involved in drug smuggling but also used for other illegal activities such as financial fraud.

According to court evidence, investigators identified cryptocurrency accounts used by the Jingao Biotech-related organization. The Nikkei investigation team developed analytical software to trace the flow of funds in these accounts.

Blockchain transaction records show that the related accounts are linked to criminal organizations.

Jingao Biotech frequently engaged in cryptocurrency transactions with financial fraud groups of Chinese background. These groups issued fake tokens named zksync.jp, deliberately mimicking existing fast payment services to trick global users into transferring funds. Losses related to this are estimated to be hundreds of millions of yen, including in Japan.

The token used the .jp domain, which typically requires applicants to have a Japanese address. The token was issued in 2023, overlapping with the period Jingao Biotech operated in Japan through Firsky.

The domain registrant appears to be a Chinese national residing in Hong Kong. After tracing the flow of funds and relationships of this individual, investigators found close ties to Jingao Biotech.

Chainalysis, a U.S. blockchain research firm, considers this type of operation a typical money laundering technique. Because Japanese domains have higher international credibility, they are easily exploited by criminals.

The investigation also found that Jingao Biotech had extensive dealings with multiple Chinese organizations and individuals sanctioned by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), particularly with the Chinese chemical company Wuhan Yuancheng Group.

The U.S. government accuses Ye Quanfa, founder of Yuancheng Group, of being one of the world's most active and notorious leaders in the production of fentanyl-class drugs. The U.S. Department of State had offered a reward of up to $5 million (approximately NT$160 million) for information leading to his conviction or arrest.

Jingao Biotech concealed the source of funds through multiple accounts and conducted over 120 transactions with sanctioned entities, primarily the Yuancheng Group. Many related individuals come from the same hometown, indicating a close network of relationships.

Experts from TRM Labs, a U.S. analysis firm invited to help verify the investigation's findings, pointed out that Japan's proximity to mainland China, its open financial system, and active trade and cross-border capital flows make it an ideal route for disguising illicit proceeds as legitimate funds.

In May of this year, the U.S. DEA and the Japan Coast Guard signed a memorandum of cooperation to strengthen efforts against drug smuggling, including fentanyl. The United Nations Office on Drugs and Crime (UNODC) has also begun taking countermeasures. (Compiled by Liu Wenyu) 1150622

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