China jails 5 Sifang operators over $428M USDT gambling network

Chinese courts sentenced five operators of the Sifang payment platform to between three and six years in prison for running a gambling network that processed more than 2.95 billion yuan ($428 million) through USDT, bank cards and third-party payment accounts, according to court records cited by The Paper.

"The operation supplied payment channels to online gambling businesses by connecting them with merchant accounts at established third-party payment companies," the Intermediate People's Court of Xilin Gol League in Inner Mongolia said in its ruling, which upheld a four-and-a-half-year sentence for defendant Ma on June 26.

The group began building the system in May 2022 after learning that payment services for gambling platforms could generate large profits, court documents showed. They commissioned 32 collection and payment platforms, rented servers outside China and contacted operators of overseas gambling websites. The Sifang platform functioned as a fourth-party, or aggregated, payment service — combining interfaces from banks and licensed processors into a single system.

Prosecutors alleged the group earned 42.85 million yuan by taking a 1.45 percent commission on merchant transfers linked to overseas gambling sites. Investigators traced the flow of funds using wallet addresses obtained from Tether and transaction records from OKX, according to The Paper. One wallet associated with defendant Zhang received 4.146 million USDT through 485 deposits between July 2022 and October 2023, while another wallet sent out 4.097 million USDT through 497 transfers.

Evidence challenges in crypto cases

Ma's lawyer argued that investigators had not established how many payment accounts his client handled or explained the purpose of more than 100 USDT transfers, The Paper reported. Wang Xiaohua, an associate professor at East China University of Political Science and Law, told the publication that linking traceable blockchain transfers to real people remains difficult when tokens do not pass through an exchange with identifying records.

The case highlights persistent problems in China's crypto-related prosecutions. A July 13 article in the People's Procuratorate Daily identified criminal liability, evidence collection and asset recovery as three unresolved issues under the current legal framework. Prosecutors from Xiangtan's Yuhu District and a Xiangtan University law professor argued that crypto's anonymous, decentralized and cross-border features have complicated investigations, pointing to inconsistencies between China's revised Anti-Money Laundering Law and Article 191 of its Criminal Law.

China's Supreme People's Procuratorate disclosed in June that authorities prosecuted more than 1,200 people for drug-related money laundering between January 2025 and May 2026. In one case, a court sentenced drug trafficker Li Mobo to death after authorities found that he laundered more than $7 million through cryptocurrency, although officials said the sentence covered several drug trafficking convictions and was not imposed for money laundering alone.

The Sifang ruling reinforces China's strict enforcement against using stablecoins for unlicensed financial activity. With no clear framework for crypto evidence collection and cross-border data requests, similar cases are likely to face the same legal challenges that emerged in this prosecution.

This article is for informational purposes only and does not constitute investment advice.