Three people were arrested Tuesday, Feb. 25, after reportedly creating shell companies that stole more than $13 million from victims of investment scams tied to “pig butchering,” according to federal prosecutors.
A Mingzhi Li, 24 and Zeyue Jia, 23, of Downtown Los Angeles and a Jun Shi, 55, of San Gabriel were charged with operating an unlicensed money transmitting business, a felony offense with a maximum sentence of five years in prison, the U.S. Attorney’s Office in Los Angeles announced.
Li and Jia are believed to be Chinese citizens who entered the U.S. on student visas that have since expired, the U.S. Attorney’s Office said. They were ordered to be held without bond.
Shi was released on a $20,000 bond. Their arraignments are scheduled for March 17 in U.S. District Court in Los Angeles.
In December 2022, Shi is accused of starting Magic Location Trading LLC and Stone Water Trading LLC, which operated as money service businesses that were meant to remit funds on behalf of third-party customers to other entities. Prosecutors allege the defendants and the companies did so without registering with the Financial Crimes Enforcement Network or the state, which is required by federal law.
Using aliases, the defendants opened U.S.-based bank accounts for their companies, which received 302 wire transfers from investment fraud victims, according to the U.S. Attorney’s Office.
Prosecutors allege the defendants then transferred those funds to overseas bank accounts, domestic businesses and individuals and used the funds for personal expenses.
Authorities referred to the fraud as a pig butchering scheme, which often involves scammers finding victims through dating apps, social media or unsolicited messages or calls, initiating a relationship and eventually convincing the victim to take part in a business investment.
They then put victims in touch with other members operating the scheme, who persuade them to transfer money into financial investments. Victims thought they were funding investment accounts, including gold contracts and Bitcoin, that they believed they were maintaining through websites or mobile apps.
After the funds were sent to the scammer-controlled accounts, the websites or apps often falsely showed victims that their fake investments had significant gains, convincing them to continue putting money into the scheme, the U.S. Attorney’s Office said.
Eventually, the victims were unable to get the money they thought they earned, resulting in significant financial losses.
One 72-year-old man from Minnesota ended up transferring funds that totaled $325,000, and he later wasn’t able to withdraw any of his purported earnings, prosecutors said.