What happened?
XREX CEO Huang Yaowen and Revenue Officer Xiao Huizong have been investigated by the Taichung District Prosecutor’s Office for allegedly assisting the “Afu Wallet” fraud group in conducting cross-chain conversions of Tether worth approximately NT$4.1 billion (12.7 million units), thereby helping the fraud group conceal the flow of illegal funds.
Considering that Xiao Huizong and Huang Yaowen admitted their crimes, have no prior convictions, and cooperated with the investigation, the prosecutors granted deferred prosecution. However, this deferred prosecution comes with conditions, including that the two must pay NT$8 million to the national treasury and promote anti-fraud and anti-money laundering efforts on the XREX platform.
During the investigation of the “Afu Wallet” money laundering case, it was discovered that a leaked police inquiry transcript was found in the fraud group’s folder, leading to the summoning of XREX investigator Chen Meihui and her police officer boyfriend. Shortly after being summoned, Chen Meihui tragically died in a car accident, and the prosecutors ultimately decided not to prosecute her due to her death.
XREX founder involved in cryptocurrency money laundering receives deferred prosecution
By the end of 2024, the unfortunate death of XREX (Chain Technology Company) financial crime investigator Chen Meihui in a car accident drew significant public attention. This tragedy subsequently implicated the company’s two founders, Huang Yaowen and Xiao Huizong, who are alleged to be involved in a large virtual currency fraud case, “Afu Wallet,” related to money laundering controversies.
After investigation, the Taichung District Prosecutor’s Office found that the two had assisted the fraud group in facilitating cross-chain operations involving up to NT$4.1 billion in cryptocurrency. Considering their confession and cooperation during the investigation, the prosecutors ultimately granted deferred prosecution, but with conditions that included paying a hefty fine and promoting anti-fraud initiatives.
Afu Wallet case exposes XREX executives; money laundering methods involve cross-chain operations
The case originated from the Taichung District Prosecutor’s Office investigating the “Afu Wallet” APP created by ACE Company, which is suspected of fraud and money laundering exceeding NT$300 million.
According to reports from United Daily News, the prosecutors discovered that the fraud group utilized cross-chain techniques to conceal the flow of funds while tracing the money trail. Further investigation revealed that a defendant surnamed Xu from the “Afu Wallet case” had contacted XREX co-founder Xiao Huizong in January 2023, requesting assistance in converting a large amount of Tether (USDT) from the TRON chain to the Ethereum chain.
Prosecutors found that Xiao Huizong and XREX co-founder Huang Yaowen, as professionals in the blockchain and cryptocurrency fields, should have clearly understood that providing cross-chain services for large amounts of cryptocurrency for others was not within the normal scope of the company’s business and posed risks of concealing criminal funds.
However, after discussions, the two decided to cooperate, hoping to develop the over-the-counter (OTC) and cross-border currency exchange markets through such large-scale operations, thereby expanding XREX’s business.
Without thoroughly verifying the legality of the fund sources, Xiao Huizong assisted the defendant surnamed Xu in the cross-chain operation through his and his wife’s Binance accounts. According to investigations, on January 10, 2023, Xiao Huizong conducted a total of 27 transactions through his account in just one day, successfully converting 12.7 million USDT (valued at about NT$4.1 billion at the time) from the TRON chain to the Ethereum chain and transferring the funds to a designated wallet.
The prosecutors have gathered complete transaction records, account information, and related testimonies, determining that the two are suspected of money laundering activities.
Founders confess and receive deferred prosecution; must pay fines and promote anti-fraud initiatives
During the interrogation, both Xiao Huizong and Huang Yaowen confessed to their crimes. The prosecutors considered their lack of prior convictions and the fact that XREX had previously cooperated with judicial authorities to seize 30 bitcoins from the defendant surnamed Xu and actively assisted in the investigation, deeming their criminal conduct relatively minor, thus agreeing to grant deferred prosecution.
However, this deferred prosecution comes with stricter conditions: Xiao Huizong must pay NT$5 million to the national treasury, while Huang Yaowen must pay NT$3 million.
Additionally, they are required to publish two anti-fraud and anti-money laundering promotional videos, each at least five minutes long, on XREX’s official website, and jointly provide a total of 40 hours of basic cryptocurrency knowledge courses for judicial authorities or law enforcement education units.
The car accident case of Chen Meihui is also implicated; no prosecution due to death
It is noteworthy that the investigation into this money laundering case has inadvertently implicated the tragic car accident death of Chen Meihui at the end of last year.
While investigating the Afu Wallet case, the prosecutors discovered dozens of complete police inquiry records from fraud victims in the cloud data of money laundering accomplices. To clarify whether the source of the records involved a leak, on December 3 of last year, they summoned Chen Meihui, her police officer boyfriend surnamed Xie, and four others including Xiao Huizong and Huang Yaowen, listing them as defendants.
After being summoned, Chen Meihui and officer Xie tragically encountered a severe car accident on the night of December 4 while returning north together via Uber, resulting in Chen Meihui’s untimely death from serious injuries. Chen Meihui had made significant contributions in tracing illegal money flows and had assisted in high-profile cases such as “Creative Private House,” “88 Club,” and Cambodia fraud. Her unexpected passing sparked public speculation regarding conspiracy theories.
Regarding the allegations of leaking information and violating personal data laws, the prosecutors determined that officer Xie was involved but also granted deferred prosecution. As Chen Meihui had passed away, the prosecutors decided not to prosecute her in accordance with the Criminal Procedure Law.
What is deferred prosecution? What does it mean?
“Deferred prosecution” (officially referred to as “deferred prosecution disposition”) is a system outlined in Article 253-1 of Taiwan’s Criminal Procedure Law.
In simple terms, deferred prosecution means that after investigation, the prosecutor believes that the defendant’s criminal suspicion is clear and that there is sufficient evidence to support prosecution. However, considering specific circumstances of the case, the defendant’s character, attitude after the crime, seriousness of the crime, prior convictions, and willingness to compensate victims, the prosecutor believes that even if the defendant is not immediately sent to court for trial, the goal of maintaining order or promoting the defendant’s rehabilitation can still be achieved.
The prosecutor will issue a deferred prosecution disposition document to the defendant, specifying a particular period for deferred prosecution (usually 1 to 5 years) and may attach conditions requiring the defendant to comply with or fulfill during this period. If the defendant adheres to the stipulations of the disposition document, fulfills the additional conditions, and is not found to have committed new crimes or violated other important regulations during the deferred prosecution period, upon its expiration, if the prosecutor does not revoke the deferred prosecution disposition, it will have the same legal effect as a non-prosecution disposition.
This means that the defendant’s case is effectively concluded, will not proceed to court trial, and will not leave a criminal judgment record (although in specific circumstances, the deferred prosecution record may still be queried).
XREX’s response: Deferred prosecution does not affect the founders’ qualifications or company operations
In response to the outcome of this case, XREX promptly provided a legal opinion in the community, stating that the result of the case for the two founders cooperating with the investigation is deferred prosecution.
According to the lawyer’s opinion, if the deferred prosecution period expires without revocation, its legal effect is equivalent to “non-prosecution disposition,” which does not affect the qualifications of serving as company managers, directors, or responsible persons, nor does it affect the company’s ongoing operations as a virtual asset service provider (VASP).
Therefore, upon the lawyer’s advice, the two founders accepted the prosecutor’s deferred prosecution proposal and are currently awaiting the formal written notice.