Crime bosses behind Myanmar cyber ‘fraud dens’ handed over to Chinese government

Myanmar authorities handed over to the Chinese government 10 suspects accused of involvement in the organized cyber fraud industry, including the heads of three prominent crime families.

The arrests come after China’s Ministry of Public Security released a wanted list in December for the members of the “family crime syndicates,” which have ties to Myanmar’s ruling junta.

Since the summer of 2023, China has ramped up pressure on Myanmar’s government to clamp down on the cyber fraud enclaves along its border, apparently fed up with an illicit industry preying on Chinese citizens with pig butchering scams, where fraudsters develop an online relationship with targets before swindling them with bogus investments. The compounds rely on forced labor trafficked into Myanmar from throughout the region and beyond.

In October, a coalition of rebel groups launched an assault in Kokang along the border with China, singling out eradication of the cyber fraud industry as a goal of the campaign. The groups managed to seize swathes of territory, including the crime capital of Laukkaing, before China mediated a ceasefire earlier this month.

On Tuesday, the Ministry of Public Security announced the detention of Bai Suocheng, former chairman of the Kokang region, his son and daughter, and the heads of two other crime families, Wei Chaoren and Liu Zhengxiang. They also arrested Liu Zhengmao and Xu Laofa, who according to the South China Morning Post allegedly led another fraud gang, along with four unnamed suspects. Four others on China’s wanted list remain at large.

The ministry called the handover a “landmark achievement” between the two countries.

Major development as authorities in #China announce capture of several fugitive members of the #Kokang BGF leadership - wanted for running industrial-scale #cyberfraud, human trafficking & #moneylaundering ops across #Myanmar & the broader #Mekong regionhttps://t.co/ecIm1ib1wd pic.twitter.com/A3nbSDuhNZ

— John W. (@johnwSEAP) January 30, 2024

“For a long time, multiple criminal groups in the Kokang Autonomous Region in northern Myanmar… have organized and opened fraud dens, openly armed fraud, and carried out telecommunications and network fraud crimes against Chinese citizens,” the agency wrote. “The amount was huge, and they were also suspected of multiple serious violent crimes such as intentional homicide, intentional injury, and illegal detention.”

The arrests follow more than a decade of shady profiteering in the country’s far north by the crime families after striking a deal with the Myanmar government. Bai Suocheng and Liu Zhengxiang were former senior members of a rebel group who defected in 2009 to join forces with the Myanmar army. Their so-called Border Guard Force provided security for the army, and in return they were free to grow a network of illicit enterprises.

“As part of this deal, the Kokang clans were permitted to engage in any form of business they liked in exchange for fully integrating the Kokang region with the military politically and economically,” Jason Tower, Myanmar head at the United States Institute of Peace, told Recorded Future News.

“They also built massive illicit casinos, and turned Kokang into a hub for all forms of criminality. In 2017, online casino operations began to evolve into mass scale fraud operations, which during the pandemic began using forced labor on a mass scale.”

More than 20,000 people are estimated to have been held inside 200-plus scam compounds controlled by the clans across Kokang, Tower said.

A recent report from the United Nations Office on Drugs and Crime highlighted the role of casinos in laundering illicit funds, including the proceeds of cyber fraud. According to the U.N., a hotel and casino operation run by Liu Zhengxiang called Fully Light Group advertises to hundreds of thousands of people on Telegram “underground banking and cryptocurrency exchange ‘pass-through’ activities, cybercrime as a service, recruitment of migrant smugglers, and development of underground banking and money laundering teams.”

According to China, during the crackdown 44,000 telecommunications fraud suspects from northern Myanmar have been handed over, including 171 "financiers." Experts have warned, however, that the industry risks shifting to other hotspots.

“This shift is already happening,” Tower said, with syndicate heads feeling pressure in Kokang having relocated to southern Shan and Karen states, including into the infamous Shwe Kokko crime hub.

“Meanwhile, many of the operators are also now partnering with another militia group known as the DKBA [Democratic Karen Buddhist Army], which controls territory further to the south,” he said. In a compound in that area known as the Taichang Zone, he said: “Construction has been booming.”