Classic case or bad precedent? BCH Group assets change hands under the U.S. Department of Justice.

Author: Zhang Feng

In the gray area of international law and finance, a shocking global asset dispute has quietly come to an end, the conclusion of which is as thunderous as a clap of thunder. The assets valued at up to 15 billion RMB belonging to Chen Zhiming, the founder of the Prince Group, were officially confiscated and handed over to the U.S. Department of Justice based on a U.S. court ruling, without any criminal conviction and even though he has never set foot on American soil.

This event is far from a simple cross-border law enforcement collaboration; rather, it paints a complex picture filled with legal maneuvering, technological investigation, extraterritorial jurisdiction, and geopolitical nuances. Is it a classic example of combating transnational crime, or a terrible precedent for the unlimited expansion of U.S. judicial power? To answer this question, we might as well delve into each aspect behind it.

1. “Money Laundering Fraud” and “Long-Arm Jurisdiction”

The charges by the U.S. Department of Justice against Chen Zhi and his princeling group revolve primarily around “money laundering” and “fraud.” According to publicly available court documents, U.S. authorities accuse Chen Zhi of using a complex network of offshore shell companies to layer and clean funds from a series of illegal activities, including telecommunications network fraud and online gambling proceeds, ultimately injecting them into the U.S. real estate market and other financial systems to legitimize them.

However, the key point of this case is that most of the so-called “upstream crimes” being accused did not occur on American soil. For example, telecommunications fraud targeting Chinese citizens primarily takes place in China, both in terms of the act and the result. So how does the U.S. Department of Justice have jurisdiction? This introduces the highly controversial principle of “long-arm jurisdiction” in the American legal system.

The logic chain of the U.S. side is as follows. First, the flow of funds through the United States, the illegal funds laundered by Chen Zhi's team circulated through the U.S. banking system or were ultimately invested in U.S. assets (such as real estate and businesses). As long as a sum of laundered money enters the U.S. financial system, the U.S. judicial system considers itself to have jurisdiction. Second, damaging U.S. interests, the U.S. side further accuses that these criminal acts “undermine the integrity of the U.S. financial system and national security.” Defining the act of money laundering using the U.S. financial system as an infringement of U.S. national interests is a common reason for the U.S. side to expand its extraterritorial jurisdiction.

Therefore, the surface of the allegation is “money laundering”, but the deeper issue relies on the principle of “minimum contacts” for “long-arm jurisdiction”. This lays the legal foundation for all subsequent investigations, freezes, and confiscation actions, and has also become one of the focal points of the controversy in this case: is the U.S. using its financial hegemony to position itself as the global financial police?

2. Financial Intelligence and Data Monitoring

In order to clarify a complex, multi-national criminal network and meet the “beyond a reasonable doubt” standard in court, the U.S. Department of Justice has deployed its powerful, multidimensional investigative methods.

Financial Intelligence Analysis This is the breakthrough of the case. The Financial Crimes Enforcement Network (FinCEN) of the United States has collaborated with major financial institutions to establish a Suspicious Transaction Reporting (STR) system. Investigators have identified a large amount of funds flowing from offshore havens (such as the Cayman Islands and British Virgin Islands) to specific accounts and real estate projects in the United States by tracking unusual money flows. By analyzing the “pathways” of these funds, they gradually outline a network map of shell companies controlled by Chen Zhi.

Cross-border data retrieval, under the authorization of the “Cloud Act,” U.S. law enforcement agencies can directly request technology companies headquartered in the U.S. (such as Google, Microsoft, Apple, etc.) to provide user data stored on foreign servers. Investigators are likely to have obtained Chen Zhi and his accomplices' emails, cloud storage files, and communication records through this method, and this electronic evidence has become crucial in establishing their criminal intent and conspiracy.

Covert surveillance and undercover operations, court documents show that investigators used informants or undercover agents to contact members of Chen Zhi's team and recorded their conversations about the nature and source of funds. This type of “sting operation” or covert evidence collection is not uncommon in the United States in cases involving complex financial crimes.

International cooperation and “turncoat witnesses”, the success of this case relies on the cooperation of countries and regions that have judicial cooperation agreements with the United States. It cannot be ruled out that there are “turncoat witnesses” within Chen Zhi's criminal group who have reached plea deals with the U.S. prosecution, providing core evidence such as the internal operating methods, keys, and ledgers of the group in exchange for reduced penalties.

This “technology + law + cooperation” three-dimensional investigation model ensures that even if Chen Zhi's team operates secretly, their criminal network is almost nowhere to hide in front of the national investigation machine.

3. Civil Forfeiture, Highly Controversial

The most shocking aspect of this case is that the freezing and confiscation of assets are not predicated on a criminal conviction. Here, the U.S. Department of Justice has employed a “magic weapon” from its legal arsenal - civil forfeiture system.

Unlike criminal forfeiture, the defendant in civil forfeiture is not a “person” but rather the “property” itself, namely the 15 billion assets. The U.S. government, as the plaintiff, accuses these assets themselves of being tools of crime or proceeds of crime. This process has several notable characteristics:

Lower Burden of Proof: There is no need to meet the “beyond a reasonable doubt” standard of criminal cases; only “preponderance of evidence” is required, which means proving that the likelihood of these assets coming from illegal activities is greater than that of coming from legal activities.

The defendant (property owner) must prove their innocence: Once the assets are frozen, Chen Zhi, as the claimed legitimate owner, needs to actively file a lawsuit to prove the legitimate source of the assets. If he cannot provide clear and complete proof of legitimate source, or if he is unwilling or unable (for example, due to facing extradition risks in a third country) to appear in court in the United States, the court may issue a default judgment declaring the assets forfeited.

Act swiftly and covertly: To prevent asset transfer, the Department of Justice can secretly apply for a freeze order from a judge in advance, instantly freezing all target assets of the defendant within the United States and even within the jurisdiction of cooperating countries, without the defendant's knowledge.

The asset freezing and confiscation of Chen Zhi's case is a perfect embodiment of this procedure. After the U.S. side obtained preliminary evidence, they swiftly initiated a civil forfeiture lawsuit, while Chen Zhi's side was unable to mount an effective defense for various reasons, ultimately leading to the massive assets being “defeated without a fight.”

IV. Tight Legal Network and Systematic Framework

Of course, the U.S. Department of Justice's move is not without legal basis; on the contrary, it relies on a mature and continually strengthened domestic legal system.

The Racketeer Influenced and Corrupt Organizations Act (RICO) was originally designed to combat organized crime such as the Mafia, but its scope is extremely broad. As long as it can be proven that there is a criminal organization of an “enterprise” nature and that at least two types of statutory “fraud schemes” have been carried out (such as mail fraud, wire fraud), it can be applied. The penalties under the RICO statute are extremely severe, including hefty fines and asset forfeiture, making it a powerful weapon for prosecutors to compel defendants to plead guilty.

The “Bank Secrecy Act” and Anti-Money Laundering Regulations require financial institutions to fulfill customer due diligence and suspicious transaction reporting obligations, providing legal protection for financial intelligence collection.

The USA PATRIOT Act further expands the government's power to track and combat terrorism financing and money laundering activities, including strengthening cross-border financial regulation.

Civil Forfeiture Related Laws: As mentioned earlier, this is a direct legal tool.

Through the combination of these laws, the U.S. Department of Justice has constructed a formally complete legal basis for its actions, although the substantive extraterritorial applicability has been widely criticized by the international community.

5. Technical Analysis and Integrated Applications

In this case, the investigation agency almost certainly utilized cutting-edge technological investigation methods, especially in relation to potential cryptocurrency money laundering.

As criminal methods evolve, Chen Zhi's team is likely to attempt to use cryptocurrencies such as Bitcoin and Tether for asset transfer, believing in their anonymity. However, U.S. law enforcement agencies, such as the Federal Bureau of Investigation (FBI) and the Homeland Security Investigations (HSI), are already equipped with powerful blockchain analysis tools (like Chainalysis and CipherTrace).

These tools enable address clustering, which aggregates multiple cryptocurrency addresses belonging to the same entity by analyzing the public blockchain ledger; transaction graphing, which clearly depicts the complete path of funds from illegal sources (such as dark web markets and scam platforms) to exchanges, then to mixing services, and finally to withdrawal or conversion into other assets; identity identification, which correlates anonymous addresses on the blockchain with real-world personal identity information through cooperation with compliant cryptocurrency exchanges.

Therefore, attempting to launder money through cryptocurrencies may instead leave immutable and extremely clear electronic traces in the face of modern investigative techniques. This may be the last technical straw that overwhelms Chen Zhi's team.

6. Industry Impact and Polarized Reactions

The conclusion of the Chen Zhi case has undoubtedly sent a shockwave globally, with far-reaching implications and polarized evaluations.

Some consider this a “classic case.” First, the strong deterrent against transnational crime, this case sends a clear message to money launderers, fraudsters, and corrupt officials around the world: no matter where your criminal activities occur, as long as the funds are linked to the U.S. financial system, you may face the risk of being “uprooted.” This greatly increases the cost and risk of global crime. Second, it raises the standards for law enforcement cooperation, demonstrating how to effectively combat highly secretive transnational financial crimes through high-tech means and multilateral legal frameworks, providing a model for other countries to follow. Third, will it become a “shortcut” for asset recovery? For the victim countries of upstream crimes (such as the victims of telecom fraud in this case, mainly in China), although the process is full of controversy, in the end, a portion of the stolen wealth has been intercepted, achieving a form of “alternative justice” to some extent.

**However, on the other hand, this could also set a “bad precedent.” Firstly, the abuse of “long-arm jurisdiction” in this case extends the effectiveness of U.S. domestic law infinitely beyond its borders, essentially judicializing its financial hegemony. Any country, if the financial transactions of its citizens or enterprises have even the faintest connection to the U.S., could become a target of U.S. jurisdiction. This severely infringes upon the sovereignty and judicial independence of other countries.

The “Predatory Nature” of the Civil Forfeiture System: This system has been heavily criticized for its “presumption of guilt” and procedural inequalities. It grants the government excessive power to deprive citizens of their property without a criminal trial, which can easily be abused as a tool for government revenue generation. The Chen Zhi case undoubtedly reinforced concerns within the international community regarding this issue.

Three is the risk of geopolitical tools: In the context of intensified strategic competition between China and the United States, such cases are difficult to completely escape from political interpretations. There are reasons to suspect whether the United States will utilize the same legal tools in the future against legitimate enterprises and individuals of its identified strategic competitor countries to achieve non-economic purposes.

Fourth, the turmoil in the global financial order: It has intensified the uncertainty of international business activities. Companies and wealthy individuals have to reassess their cross-border asset allocation and structural design, fearing that an inadvertent “connection” could make them the next “Chen Zhi”.

The case of the Taizi Group's Chen Zhi transferring 15 billion assets to the U.S. Department of Justice is a complex multifaceted issue. From the perspective of combating crime, it is undoubtedly a technically proficient and remarkable law enforcement operation that may result in the collapse of the wealth empire of a suspect involved in significant financial crimes and their gang, making it a classic example.

However, from the perspective of international law and national sovereignty, it sets a disturbing precedent. It demonstrates how a country, possessing absolute advantages in finance, technology, and law, can transcend traditional territorial boundaries and enforce its domestic laws globally. If this power is not restrained, it could transform from a tool for maintaining order into a hegemony that creates chaos.

Ultimately, what this case leaves the world with is an unresolved question: what kind of global governance order do we need in a world that is interdependent yet full of competition? Should we accept a “world police” led by the most powerful nations, or should we strive to build an international judicial cooperation system based on equal sovereignty and true multilateralism? The answer from Chen Zhi'an is clearly the former. And this is precisely the fundamental reason that is deeply unsettling and will inevitably provoke long-lasting repercussions.