A recent Nikkei report reveals a sophisticated cryptocurrency fraud tied to a Chinese fentanyl network, which used a fake ‘Zksync.jp’ token to deceive global investors via Japanese domains. The scheme caused losses exceeding $1 million.
The investigation identifies Hubei Amarvel Biotech, a Wuhan chemical firm, as central to the operation. Two executives were previously cleared of top fentanyl charges but convicted for conspiracy to import precursors and money laundering. Nikkei links a Nagoya-based company, Firsky, as a front, with a Chinese national named Xia Fengzhi managing logistics and funds. Firsky liquidated in July 2024, and Xia’s whereabouts are unknown.
Blockchain analysis reveals over 120 transactions connecting the network to entities under U.S. sanctions, including parties related to Wuhan Yuancheng Group and Chuen Fat Yip, who faces a $5 million reward for arrest. The fraudulent token mirrored the legitimate ZKsync Ethereum Layer 2 network, but no link exists between Matter Labs and the scam.
The use of Japanese domains enhanced credibility, as registrants must have local addresses. Nikkei found the domain registrant was a Chinese national in Hong Kong with ties to Amarvel. Chainalysis noted such tactics make fraud sites more trustworthy.
Japan is currently expanding its crypto regulations, including a bill to reclassify crypto under the Financial Instruments and Exchange Act and a 2028 tax plan for 20% rates. However, this case highlights how criminal networks exploit Japanese infrastructure. TRM Labs reports 97% of Chinese precursor manufacturers accept crypto, with wallets receiving over $26 million in 2023.