The founder of a Taiwanese cryptocurrency exchange has been 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 confiscate Pan’s assets.

Cryptocurrency Fraud Investigation Ends with Prosecution and Asset Forfeiture

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

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

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

The defendant was charged with violations of the Regulations on the Prevention and Control of Organized Crime, aggravated fraud and money laundering. The press release noted that 162 of the victims were affected, and the amount of fraud losses exceeded NT$340 million, or about US$10.7 million.

The prosecutor asked the Taiwan court to consider “the seriousness of the crime and the seriousness of the malice”. As a result, the judge approved the confiscation of the property of the seven defendants.

About NT$3.48 million in cryptocurrency were seized, as well as real estate worth NT$2.75 million, NT$140,000 in deposits, and NT$485,000 in cash. In total, more than NT$31.6 million was seized.

Web of Lies and ACE Response

Prosecutors found that the defendants engaged in “offline and over-the-counter transactions of virtual currency” through the “Alfred Wallet” app.

According to the press release, Fuhai created the Alfred wallet and offered A+Card for fraudulent purposes. These virtual currency prepaid cards are sold in partnership with fake online investment groups.

With the help of social media groups, scammers are promoting and hyping up virtual currency investments because cryptocurrencies “have the potential to bring significant returns.” In addition, they promote the purchase of TIDE tokens from specific dealers.

According to the investigation, the defendant took advantage of the common belief that people are more trustworthy in brick-and-mortar stores. As a result, they urge victims to purchase their tokens at a local store that is authorized to operate the Fuhai Alfred wallet.

The in-store staff will help the victim store their tokens in the Alfred Wallet using A+Card. However, the defendant took advantage of the app’s “operating model” to manage the wallet. In this way, the user’s wallet address and the flow of funds can be controlled from the backend, while “the transfer of the flow of money cannot be publicly queried on the blockchain ledger”.

Subsequently, the system is used to manipulate the address of the user’s wallet and control the funds from the backend. When the victim tries to withdraw funds, members of the scam ring will make excuses, such as “wrong order” and “account problem”, or refuse to give a reason.

After the indictment was published, ACE issued a statement to distance itself from the founders. The cryptocurrency exchange clarified that the Alfred wallet is not a product of ACE, as it was “developed by a third party commissioned by former director David Pan.”

Finally, the exchange assures users that their trading and operations are in good condition and that their assets are safe.