Exclusive decryption of Steaker's indictment: involving quantitative technology lending and mixed use of assets, why did prosecutors determine that money was sucked and laundered?

More than two years after Taiwan's well-known asset management platform Steaker was affected by FTX, founder Huang Weixuan and others recently sued based on the Money Laundering Prevention Act and the Banking Law, and industry people and the community have different opinions on the reasons for prosecution, and Steaker also insists that it operates legally. Chain News exclusively obtained Steaker's indictment, which will understand the reasons for prosecution through the prosecutor's perspective.

Get a quick overview of the Steaker prosecution takeaway

Provide virtual currency capital protected usury investment solutions to attract unspecified public investment

The prosecutor pointed out that since September 2019, Huang Weixuan and others have set up the "Steaker" digital asset management platform through Steco, launched virtual currency investment solutions with annual interest rates ranging from 3.5% to 88%, emphasized attractive conditions such as "capital and interest protection" and "zero maximum loss", and claimed that the assets are managed by CYBAVO and have a SAFU security fund.

This information is disclosed to an unspecified public on the platform, so that investors believe that it is true, and have successively applied for a variety of solutions based on Tether (USDT), USDC, BUSD, DAI, Ether (ETH), and Bitcoin (BTC). According to the survey, from 2019 to the end of 2022, a total of more than US$48 million, equivalent to about NT$1.48 billion, has flowed into the platform.

Funds are not clearly managed A large amount is transferred to the personal account of the person in charge

The investigation found that the virtual currency transferred by investors to the platform wallet will be automatically transferred to the deposit wallet jointly controlled by Huang Weixuan, Xiu Minjie and Pan Yixuan. Wong then instructed to transfer some of his assets to his personal sub-account on the FTX Exchange for strategic trading, usury lending, or further transfer to multiple channels such as the Steaker withdrawal wallet.

According to the indictment, Huang Weixuan's team transferred 360,000 USDCs to AAVE, a well-known decentralized lending platform. AAVE is an open blockchain application that allows users to freely lend and borrow virtual assets through the platform to obtain interest or liquidity income. The whereabouts of this fund are not informed by the investor, nor are they clearly listed in the platform investment plan, which may violate the information disclosure obligation and fund management principles.

IN ADDITION, PROSECUTORS FOUND THAT THE TEAM ALSO LENT SOME OF ITS VIRTUAL ASSETS TO TWO LEGAL ENTITIES, QUANTREND TECHNOLOGY, INC. AND TAIWAN'S BAY VALLEY TECHNOLOGY CO., LTD., AND SIGNED VIRTUAL ASSET LOAN AGREEMENTS WITH THE TWO COMPANIES IN THE NAME OF "STECO TECHNOLOGY CO., LTD." REGISTERED IN THE SEYCHELLES.

When the withdrawal demand increases, the platform will transfer funds from the exchange or deposit wallet to pay. The overall flow of funds is complicated, and it is even used to pay for the company's personnel, rent and daily operations, indicating that the mixing of personal and company assets is serious, in violation of relevant financial regulations.

Account staggered funds are mixed with the intention of disguising the source and destination of funds

THE INVESTIGATION ALSO REVEALED THAT HUANG WEIXUAN AND STECO HAVE ACCOUNTS ON FTX AND BINANCE EXCHANGES, AND HAVE MULTIPLE VIRTUAL WALLETS (SUCH AS WILSONHUANG.ETH, ETC.), AND THE FLOW OF FUNDS IS SHUTTLED BETWEEN THEM, SUSPECTED OF DELIBERATELY CREATING BREAKPOINTS, COVERING UP THE TRUE FLOW OF CRIMINAL PROCEEDS, AND SUSPECTED OF MONEY LAUNDERING.

Prosecution, search, seizure of a number of digital assets and exhibits, the whole case is investigated in accordance with law

The Taipei City Investigation Department issued a search ticket to conduct a search, seized a number of computers and digital assets, and ruled to seize relevant assets including virtual currency in accordance with the law, and traced the proceeds of crime in accordance with the law.

The prosecutor stressed that although the platform is in the name of "digital asset management", it actually constitutes illegal gold absorption and money laundering, which violates the provisions of the Banking Law that prohibit the receipt of deposits and funds without a license. The investigation of the whole case has now been completed, and Huang Weixuan and a number of accomplices have been prosecuted according to law.

Steaker's perspective on charges such as gold absorption: Receiving stablecoins is also considered receiving deposits

In this criminal case, the defendants Huang Weixuan, Xiu Minjie, Lu Tianxin, Pan Yixuan and others were accused by the prosecutor of illegally absorbing funds from the public, which constituted a violation of the Banking Law and the Money Laundering Prevention Law.

According to the court's findings, they raised funds from an unspecified public in the name of "borrowing", "investing", "joining shareholders", etc., and promised to pay dividends, interest, dividends or other remuneration significantly higher than the principal. Such operations appear to be ordinary investments, but in fact they have already violated the explicit prohibition of "accepting deposits" under banking law.

Articles 29 and 29-1 of the Banking Law of the Republic of China expressly stipulate that non-banking institutions shall not engage in the business of receiving deposits. The so-called "receipt of deposits" is not limited to the form of direct cash receipt, but also includes the movement of funds through virtual game tokens, virtual currencies or other items or rights with monetary value that can be traded in the market and converted into money. Therefore, even if these defendants did not receive physical cash, their act of absorbing money in the form of virtual assets still constitutes an offence. ( Past judgment references: Supreme Court 110 Taishang Zi No. 3277, Taiwan High Court 109 Jin Appeal Zi No. 59 )

The prosecution pointed out that the total amount of funds absorbed by these defendants exceeded NT$100 million, and there was a joint criminal intent and division of conduct, which met the legal requirements of "joint principal offender". If an act commits more than one crime at the same time, the punishment shall be heavier in accordance with Article 55 of the Criminal Code. In addition to the crime of illegal business operation in violation of Article 125 of the Banking Law, the relevant acts also touch on Article 14 of the Money Laundering Prevention Law before the amendment, which is a major crime.

Among them, because Huang Weixuan is the person in charge, Stecco is also involved in illegal operation and deposit absorption, the company itself should be fined according to the provisions of Article 127-4 of the Banking Law.

As for the assets and property seized in the case, the court held that they were all proceeds of crime and should be confiscated in accordance with the relevant provisions of Article 136-1 of the Banking Law and Article 38 of the Criminal Law; If confiscation is not possible, the equivalent amount shall be further pursued.

In addition, the prosecution also found that the defendant was suspected of disseminating investment information to the public through the Internet by more than three people, suspected of fraudulently obtaining money, and conducted a joint investigation in accordance with Article 339-4 of the Criminal Law.

On the whole, what the indictment reveals is not a simple investment dispute, but an illegal act of absorbing money by using legal clothing such as investment, borrowing, and shareholders. Through the flexible application and interpretation of the Banking Law, the judicial authorities have tried to curb the spread of such underground funds and maintain financial order and the property safety of the public.

This article exclusively declassified Steaker's indictment: involving quantitative technology lending and mixed use of assets, why did prosecutors decide to suck money and launder money? It first appeared in Chain News ABMedia.