A Hong Kong district court has rejected Xiao Rui’s claim that part of his money came from selling Bitcoin and found him guilty of laundering more than HK$64 million through underground banking channels.
The 37-year-old son of a former anti-corruption official from Wuhan faces sentencing on July 23 after being found guilty on four counts of money laundering and one count of using a false document.
Bogus BTC sale defense gets rejected
Between March 2014 and November 2023, about 38 transactions totaling over HK$64 million flowed into Xiao Rui’s personal bank accounts. The money came from at least 12 companies and 12 individuals. None had any business ties to Xiao’s asset management firm, yet he told the court that some of the money in his Hong Kong bank accounts came from selling Bitcoin.
Acting Judge Bernard Chung said Xiao could not provide any basic records like transaction dates, reference numbers, or wallet addresses to prove his claim. The judge found this explanation weak and rejected it outright.
Xiao also claimed that the money was a gift from his mother. According to him, she had earned the money through her business and gave it to him for investment in Hong Kong. However, under questioning, Xiao said his mother had worked as a nurse before moving to administrative jobs. He claimed she received a cash bonus of HK$20 million from a power company in 2016, but the judge said this story did not fit with her employment history.
The court heard that a contractor named Yao Qian, who had secured a municipal water-pump project in Wuhan, deposited about HK$4.72 million into Xiao’s bank account. Xiao Jun, Xiao Rui’s father, reportedly helped with this contract when he headed a bureau in the Wuhan People’s Procuratorate. Notably, the older Xiao was previously suspended amid a mainland corruption investigation.
The judge found the contractor’s testimony believable and rejected the defense claim that the money was legitimate business income.
How did Xiao get Hong Kong residency with fake documents?
The case also includes fraud related to Xiao Rui’s Hong Kong residency. In 2013, he applied to live in Hong Kong through the Capital Investment Entrant Scheme. This program required applicants to show they had assets over HK$10 million. Xiao submitted fake deposit certificates from a China Construction Bank branch in Wuhan.
Bank staff later confirmed the accounts did not exist. Despite this, Xiao was approved for residency in 2014, and that same year, he used his HSBC account to buy two fund products worth HK$10 million in order to meet the scheme’s investment requirements.
The court found Xiao guilty of using false documents for this application, and he claimed to be unaware of the fact that the documents were fake because his mother handled the application. The judge did not accept this excuse.
Prosecutors said the money laundering happened over nearly a decade. Xiao used accounts at Standard Chartered, DBS, and HSBC to move the money through what the court called underground banking channels.
The Independent Commission Against Corruption (ICAC) has asked for the criminal proceeds to be taken from Xiao, but a date for this hearing has not been set yet.
Xiao will stay in custody until his sentencing, where he faces prison time for the money laundering charges, which carry sentences of up to 14 years in Hong Kong.
