Why the biggest money laundering scam in British history is far from over

Eventually, Qian was found in York, lying in bed with a fortune of £5 billion of Bitcoin to her name.

Qian was jailed last week for 11 years and 8 months. However, although the mastermind behind the largest money laundering scam in British history is behind bars, justice has yet to be served.

“I’ve never seen anything like this,” said Waleed Tahirkheli, a senior partner at Eldwick Law who specialises in the proceeds of crime.

“The scale is unprecedented.”

What happens with the proceeds has now created a headache, which might pit British lawyers against the Chinese victims and even the state’s Communist Party.

A legal case with a diplomatic cost

Between 2014–2017, Qian took investments from 128,000 people in China, mostly pensioners, with the promise of returns of up to 300%.

Instead, she pocketed the money and invested a portion into Bitcoin, which has since ballooned to a valuation of £5bn. Now in the hands of the British state, it will be converted into what Mr Tahirkheli calls “realisable property, which is basically cash”.

The question of who will receive that compensation, and how much, is less straightforward, however.“

This all comes down to how the UK authorities interpret the law on confiscation and compensation,” Mr Tahirkheli said. It could take years, leading the UK into a direct legal battle with the Chinese victims and even the Chinese Communist Party.

Under UK law, there are various legal mechanisms used to hold and redistribute criminal assets. In the Qian case, the UK is setting up a civil compensation scheme, which places a priority on ensuring that her victims are repaid the value of what they lost.

But, this is balanced by another mechanism within the law called the Asset Recovery Incentivisation Scheme (ARIS), which allows the police and Home Office to split whatever is left after compensating victims.

Last year, £98.1m was kept by the state under this scheme.The moment the scale of Qian’s assets became clear, the Treasury reportedly earmarked the entire £5bn.

With the public finances stretched and a stubborn deficit, the government is faced with the political incentive to recoup as much of the stash as possible.

But this brings the UK on a potential collision course with the investors in China, who appear to be showing little appetite for sharing any of the assets.

In a letter to China’s foreign ministry, Qian’s victims claimed they are “the legitimate owners of this huge amount of Bitcoin”.

They went on to state that they ‘do not want, and will never accept, a situation where “Bitcoins are confiscated by the UK and not returned to us”.

China, friend or foe?

Dealing directly with the Chinese government becomes a distinct possibility if the UK cannot reach an agreement with Qian’s victims.

But for Dr Helen Taylor, a senior researcher at Spotlight on Corruption, this was going to happen anyway. “It is very much in the interests of the Chinese government to help retrieve these funds,” she said.

“And they are under pressure to do so.”

And from a legal perspective, Mr Tahirkheli believes the same: “We're talking about 128,000 investors from China. This is already large enough to be a state-to-state issue.”

The Metropolitan Police told LBC that they engaged in “unprecedented cooperation with Chinese law enforcement” to capture Qian and seize her crypto billions. Whether this cooperation can continue is in doubt.“If China wants to lead on redistributing the funds,” says Dr Taylor, “How would this be done, and what would their chosen mechanism be for returning the money?”

“This tends to be an area of major contention in these cases. Often, a state acts as the negotiator that receives the funds, but in many cases, like this one, the victims are individuals.”

If the UK is concerned that Qian’s victims receive their compensation in full–whatever that may be–it will have to trust China.

But given the fraught diplomatic ties between the two countries, heightened recently due to concerns with Chinese spying efforts in the UK, trust seems to be in short supply.“

What would usually happen in these cases,” says Dr Taylor, “is that a civil society organisation would monitor how the funds get dispersed. But how likely is it that China would support this?”

A disappearing fortune?

Beyond the obstacles facing the UK in dealing with Qian’s investors and the Chinese government, there is the added struggle of navigating the opacity of Qian’s cryptocurrency fortune.

“One of the big challenges in fraudulent crypto is that, like any other crypto, it can be held offline in ‘cold wallets’,” says Tahirkheli. “Whether the Met will be able to access all of them is a big question.”

A so-called cold wallet can come in the form of a hard drive used to stash cryptocurrency. When the police raided Qian’s house in 2018, they found a memory stick containing £67m of bitcoin sewn into the lining of her tracksuit bottoms.

Taylor reckons this is why Qian invested her dirty cash into the cryptocurrency in the first place.

“Crypto transactions are incredibly complex because of their scale and speed. These transactions happen across borders, are difficult to see, and require cooperation between domestic and foreign law enforcement agencies, which is often difficult and resource-intensive.”

According to Dr Taylor, “the reality is that regulators and law enforcement are a few steps behind the technology in this fast-developing space.”

“They’ve done incredibly well to seize the crypto wallets in this instance, but it is a real risk that they haven't managed to cover everything. And that will be something that maybe is never known.”

And given Bitcoin’s fluctuating value, by the time the UK is satisfied it has seized all of Qian’s fortune and agreed a payout with China, its value could be higher or lower than what it is today.

When LBC asked the Metropolitan Police whether they are confident that they seized the entirety of Qian’s crypto fortune, a statement read: “We have done our best to identify and seize all criminal assets where possible and will attempt to recover any further funds identified.”