Taiwanese cryptocurrency exchange founder charged with money laundering, fraud

David Pan, the founder of Taiwanese cryptocurrency exchange ACE, and six other suspects were charged by prosecutors on suspicion of fraud and money laundering.

According to an official press release, the court ruled that Pan's assets should be confiscated.

Cryptocurrency fraud investigation ends with indictment and asset forfeiture

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

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

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

The defendants were charged with violating the Ordinance on the Prevention and Control of Organized Crime, serious fraud and money laundering. The press release stated that 162 victims were affected, and the amount of fraud losses exceeded NT$340 million, approximately US$10.7 million.

The prosecutor asked the Taiwanese court to consider "the circumstances of the crime are serious and the malice is serious." Therefore, the judge approved the confiscation of the properties of the seven defendants.

Approximately NT$3.48 million in cryptocurrency was seized, as well as real estate worth NT$2.75 million, deposits of NT$140,000, and cash of NT$485,000. The total amount seized exceeded NT$31.6 million.

Web of Lies and ACE’s Response

Prosecutors found that the defendants conducted "offline and over-the-counter virtual currency transactions" through the "Alfred Wallet" application.

According to the press release, Fuhai created the Alfred wallet and provided the A Card for the purpose of the fraud. These virtual currency stored-value cards were sold in partnership with fake online investment groups.

Scammers, with the help of social media groups, are promoting and hyping virtual currency investments because cryptocurrencies “may bring significant returns.” Additionally, they promote the purchase of TIDE tokens from specific dealers.

According to the investigation, the defendants exploited the common belief that physical stores are more trustworthy. Therefore, they urge victims to purchase their tokens at local stores authorized to operate Fuhai Alfred wallet.

In-store staff will help victims store their tokens in the Alfred Wallet using an A Card. However, the defendants exploited the app’s “operating model” to manage the wallet. Through this method, users’ wallet addresses and fund flows can be controlled from the backend, while “the transfer of currency flows cannot be publicly queried on the blockchain ledger.”

The system was then used to manipulate the addresses of user wallets and control funds from the backend. When victims try to withdraw their funds, members of the scam ring give excuses such as "wrong order" and "account issues" or refuse to give a reason.

After the indictment was announced, ACE issued a statement dissociating itself from the founder. 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 assured users that its trading and operating conditions were normal and guaranteed the safety of user assets.

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