Taiwanese Crypto Exchange Founder Charged with Money Laundering and Fraud

David Pan, founder of Taiwanese cryptocurrency exchange ACE, and six other suspects have been charged by prosecutors on suspicion of fraud and money laundering.

According to an official press release, the court ruled to seize Pan’s assets.

Cryptocurrency fraud investigation ends with indictment and asset seizure

In January 2024, news broke that one of Taiwan’s largest cryptocurrency exchanges was under police investigation for suspected fraud. The investigation uncovered an “organized” scheme by ACE Exchange founders David Pan and Lin Nam, who “deceived” victims into investing in worthless virtual currencies.

As part of the investigation, police raided 15 locations including ACE's headquarters and arrested 14 people, including Pan and Lin. In addition, NT$200 million worth of US$6.4 million was seized in the raids.

The investigation into alleged money laundering and fraud by ACE and its investment company, Fuhai Digital Innovation, continues. This week, prosecutors from the Taichung District Prosecutor's Office indicted Pan and six other suspects on criminal charges.

The defendants were charged with violating the Organized Crime Prevention Act, aggravated fraud and money laundering. The press release stated that 162 victims were affected and the amount of fraud losses exceeded NT$340 million, or about US$10.7 million.

Prosecutors asked the Taiwanese court to consider the "serious circumstances of the crime and great malice." Therefore, the judge approved the confiscation of the seven defendants' assets.

Approximately NT$3.48 million in cryptocurrencies were seized, as well as real estate worth NT$2.75 million, NT$140,000 in deposits, and NT$485,000 in cash. The total amount seized was over NT$31.6 million.

The Web of Lies and ACE’s Response

Prosecutors found that the defendants conducted “offline and over-the-counter transactions of virtual currencies” through the “Alfred Wallet” application.

According to the press release, Fuhai created the Alfred Wallet and provided the A+Card, which was used in the fraudulent activities. These virtual currency stored value cards were sold in partnership with fake online investment groups.

With the help of social media groups, the scammers promoted and hyped virtual currency investments because cryptocurrencies “could bring significant returns” and promoted the purchase of TIDE tokens from specific dealers.

According to the investigation, the defendants took advantage of the general belief that physical stores are more trustworthy. Therefore, they urged victims to buy their tokens at local stores that are authorized to operate Fuhai Alfred Wallet.

The store staff would help the victims store their tokens in Alfred Wallet using A+Card. However, the defendant used the application's "operation model" to manage the wallet. In this way, the user's wallet address and fund flow can be controlled from the backend, and "the transfer of currency flow cannot be publicly queried on the blockchain ledger."

The system was then used to manipulate the user's wallet address and control the funds from the backend. When the victim tried to withdraw the funds, members of the fraud gang would make excuses such as "wrong order" and "account problem" or refuse to give a reason.

After the indictment was released, ACE issued a statement distancing itself from its founder. The cryptocurrency exchange clarified that the Alfred wallet is not an ACE product because it was “developed by a third party commissioned by former director David Pan.”

Finally, the exchange assured users that its trading and operations are normal and that the security of user assets is guaranteed. #ACE交易所 #洗钱指控