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Exclusive: U.S. probes China's Huawei over equipment near missile silos

By Alexandra Alper
8 minute read

WASHINGTON, July 21 (Reuters) - The Biden administration is investigating Chinese telecoms equipment maker Huawei over concerns that U.S. cell towers fitted with its gear could capture sensitive information from military bases and missile silos that the company could then transmit to China, two people familiar with the matter said.

Authorities are concerned Huawei (HWT.UL) could obtain sensitive data on military drills and the readiness status of bases and personnel via the equipment, one of the people said, requesting anonymity because the investigation is confidential and involves national security.

The previously unreported probe was opened by the Commerce Department shortly after Joe Biden took office early last year, the sources said, following the implementation of rules to flesh out a May 2019 executive order that gave the agency the investigative authority.

The agency subpoenaed Huawei in April 2021 to learn the company's policy on sharing data with foreign parties that its equipment could capture from cell phones, including messages and geolocational data, according to the 10-page document seen by Reuters.

The Commerce Department said it could not "confirm or deny ongoing investigations." It added that: "protecting U.S. persons' safety and security against malign information collection is vital to protecting our economy and national security."

Huawei did not respond to a request for comment. The company has strongly denied U.S. government allegations that it could spy on U.S. customers and poses a national security threat.

The Chinese embassy in Washington did not respond to the specific allegations. In an emailed statement, it said: "The U.S. government abuses the concept of national security and state power to go all out to suppress Huawei and other Chinese telecommunications companies without providing any solid proof that they constitute a security threat to the U.S. and other countries."

Reuters could not determine what actions the agency might take against Huawei.

Eight current and former U.S. government officials said the probe reflects lingering national security concerns about the company, which was already hit with a slew of U.S. restrictions in recent years.

For a timeline on the U.S. government’s trade restrictions on Huawei please click
[broken hyperlink]

If the Commerce Department determines Huawei poses a national security threat, it could go beyond existing restrictions imposed by the Federal Communications Commission (FCC), the U.S. telecoms regulator.

Using broad new powers created by the Trump administration, the agency could ban all U.S. transactions with Huawei, demanding U.S. telecoms carriers that still rely on its gear quickly remove it, or face fines or other penalties, a number of lawyers, academics and former officials interviewed by Reuters said.

The FCC declined to comment.


U.S.-CHINA TECH WAR

Huawei has long been dogged by U.S. government allegations it could spy on U.S. customers, though authorities in Washington have made little evidence public. The company denies the allegations.

"If Chinese companies like Huawei are given unfettered access to our telecommunications infrastructure, they could collect any of your information that traverses their devices or networks," FBI Director Christopher Wray warned in a speech in 2020. "Worse still: They'd have no choice but to hand it over to the Chinese government, if asked."

Reuters could not determine if Huawei's equipment is capable of collecting that sort of sensitive information and providing it to China.

"If you can stick a receiver on a (cellphone) tower, you can collect signals and that means you can get intelligence. No intelligence agency would pass an opportunity like that," said Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a Washington D.C.-based think tank.

One move to address the perceived threat was a 2019 law and related rules forbidding U.S. companies from using federal subsidies to buy telecoms equipment from Huawei. It also tasked the FCC with compelling U.S. carriers that receive federal subsidies to purge their networks of Huawei equipment, in return for reimbursement.

But the so-called "rip and replace" deadline to remove and destroy Huawei equipment completely will not kick in until mid-2023 at the earliest, with additional opportunities for companies to seek extensions. And reimbursements will only reach 40% of the total requested for now.


TOWERS NEAR MISSILE SILOS

Cell towers equipped with Huawei gear that are close to sensitive military and intelligence sites have become a particular concern for U.S. authorities, according to the two sources and an FCC commissioner.

Brendan Carr, one of the FCC's five commissioners, said that cellphone towers around Montana's Malmstrom Air Force Base - one of three that oversee missile fields in the United States - ran on Huawei technology.

In an interview this week, he told Reuters there was a risk that data from smartphones obtained by Huawei could reveal troop movements near the sites: "There’s a very real concern that some of that technology could be used as an early warning system if there happened to be, God forbid, an ICBM missile strike."

Reuters was unable to determine the exact location or scope of Huawei equipment operating near military facilities. Individuals interviewed by Reuters pointed to at least two other likely cases in Nebraska and Wyoming.

Crystal Rhoades, a commissioner at Nebraska's telecoms regulator, has flagged to media the risk posed by the proximity of cell towers owned by Viaero to intercontinental ballistic missile (ICBM) silos in the western part of the state.

ICBMs carry nuclear warheads to targets thousands of miles away and are stored in underground silos near military bases. The Nebraska cell towers are near a missile field overseen by F.E. Warren Air Force Base in neighboring Wyoming.

Viaero provides mobile telephone and wireless broadband services to about 110,000 customers in the region. It said in a 2018 filing to the FCC opposing the commission's efforts at curbing Huawei's expansion that approximately 80% of its equipment was manufactured by the Chinese firm.

That gear could potentially enable Huawei to glean sensitive information about the sites, Rhoades told Reuters in June.

"An enemy state could potentially see when things are online, when things are offline, the level of security, how many people are on duty in any given building where there are really dangerous and sophisticated weapons," Rhoades said.

Rhoades said in July that she had not been updated on rip and replace efforts by Viaero in more than two years, despite requesting updated information from the company in recent weeks.

At the time of last contact, the company said it would not begin removal efforts until the FCC money became available.

The FCC advised companies on Monday how much of their funding requests it can reimburse.

Viaero did not respond to multiple requests for comment. Huawei also declined to comment.

In Wyoming, then CEO of rural carrier Union Wireless, John Woody, said in a 2018 interview with Reuters that the company's coverage area included ICBM silos near the F.E. Warren Air Force Base and that its equipment included Huawei switches, routers and cell sites.

Last month, Eric Woody, John's son and acting CEO, said "virtually all the Huawei gear Union purchased remains in our network." He declined to say whether the towers close to the sensitive military sites contain Huawei equipment.

F.E. Warren Air Force Base referred comment on the Huawei equipment to the Pentagon. The United States Strategic Command, which is responsible for nuclear operations, said in a statement to Reuters: "We maintain constant awareness of activities near our installations and sites." It noted that "any concerns are on a whole of government level" but declined to provide further details on what those concerns are.


NEW POWERS AGAINST FOREIGN ADVERSARIES


Rick Sofield, a former DOJ official in the national security division who reviewed telecoms transactions, said the Commerce Department probe could give additional bite to the FCC’s crackdown but there was nothing new in targeting Huawei.

"The U.S. government’s concerns regarding Huawei are widely known so any information or communications technology company that continues to use Huawei products is assuming the risk that the U.S. government will come knocking," said Sofield, who represents U.S. and foreign companies facing U.S. national security reviews. He said he has not worked for Huawei.

The Commerce Department is using authority granted in 2019 that allows it to ban or restrict transactions between U.S. firms and internet, telecom and tech companies from "foreign adversary" nations including Russia and China, according to the executive order and related rules.

The two sources familiar with the Huawei investigation and a former government official said Huawei was one of the Biden administration's first cases using the new powers, referred to Commerce in early 2021 by the Justice Department.

The Justice Department referred requests for comment by Reuters to Commerce.

The subpoena is dated April 13, 2021, the same day that Commerce announced a document request was sent to an unnamed Chinese company under the new powers.

It gives Huawei 30 days to provide seven years' worth of "records identifying Huawei's business transactions and relationships with foreign entities located outside of the United States, including foreign government agencies or parties, that have access to, or that share in any capacity, U.S. user data collected by Huawei."

Noting that the "focus of this investigation is the provisioning of mobile network and telecommunications equipment...by Huawei in the United States," it also asks Huawei for a complete catalog of "all types of equipment sold" to "any communications provider in the United States," including names and locations of the parties to the sale.

Reporting by Alexandra Alper; Additional reporting by Diane Bartz; Editing by Chris Sanders and Lisa Shumaker

[Note: multiple hyperlinks at linked website article.]

==================

FBI found Chinese-made Huawei equipment could disrupt US nuclear arsenal communications

Katie Bo Lillis, CNN

July 23, 2022, 12:01 AM

On paper, it looked like a fantastic deal. In 2017, the Chinese government was offering to spend $100 million to build an ornate Chinese garden at the National Arboretum in Washington DC. Complete with temples, pavilions and a 70-foot white pagoda, the project thrilled local officials, who hoped it would attract thousands of tourists every year.

But when US counterintelligence officials began digging into the details, they found numerous red flags. The pagoda, they noted, would have been strategically placed on one of the highest points in Washington DC, just two miles from the US Capitol, a perfect spot for signals intelligence collection, multiple sources familiar with the episode told CNN.

Also alarming was that Chinese officials wanted to build the pagoda with materials shipped to the US in diplomatic pouches, which US Customs officials are barred from examining, the sources said.

Federal officials quietly killed the project before construction was underway.

The canceled garden is part of a frenzy of counterintelligence activity by the FBI and other federal agencies focused on what career US security officials say has been a dramatic escalation of Chinese espionage on US soil over the past decade.

Since at least 2017, federal officials have investigated Chinese land purchases near critical infrastructure, shut down a high-profile regional consulate believed by the US government to be a hotbed of Chinese spies and stonewalled what they saw as clear efforts to plant listening devices near sensitive military and government facilities.

Among the most alarming things the FBI uncovered pertains to Chinese-made Huawei equipment atop cell towers near US military bases in the rural Midwest. According to multiple sources familiar with the matter, the FBI determined the equipment was capable of capturing and disrupting highly restricted Defense Department communications, including those used by US Strategic Command, which oversees the country’s nuclear weapons.

While broad concerns about Huawei equipment near US military installations have been well known, the existence of this investigation and its findings have never been reported. Its origins stretch back to at least the Obama administration. It was described to CNN by more than a dozen sources, including current and former national security officials, all of whom spoke on condition of anonymity because they were not authorized to speak publicly.

It’s unclear if the intelligence community determined whether any data was actually intercepted and sent back to Beijing from these towers. Sources familiar with the issue say that from a technical standpoint, it’s incredibly difficult to prove a given package of data was stolen and sent overseas.

The Chinese government strongly denies any efforts to spy on the US. Huawei in a statement to CNN also denied that its equipment is capable of operating in any communications spectrum allocated to the Defense Department.

But multiple sources familiar with the investigation tell CNN that there’s no question the Huawei equipment has the ability to intercept not only commercial cell traffic but also the highly restricted airwaves used by the military and disrupt critical US Strategic Command communications, giving the Chinese government a potential window into America’s nuclear arsenal.

“This gets into some of the most sensitive things we do,” said one former FBI official with knowledge of the investigation. “It would impact our ability for essentially command and control with the nuclear triad. “That goes into the ‘BFD’ category.”

“If it is possible for that to be disrupted, then that is a very bad day,” this person added.


Turning doves into hawks


Former officials described the probe’s findings as a watershed moment. The investigation was so secret that some senior policymakers in the White House and elsewhere in government weren’t briefed on its existence until 2019, according to two sources familiar with the matter.

That fall, the Federal Communications Commission initiated a rule that effectively banned small telecoms from using Huawei and a few other brands of Chinese made-equipment. ”The existence of the investigation at the highest levels turned some doves into hawks,” said one former US official.

In 2020, Congress approved $1.9 billion to remove Chinese-made Huawei and ZTE cellular technology across wide swaths of rural America.

But two years later, none of that equipment has been removed and rural telecom companies are still waiting for federal reimbursement money. The FCC received applications to remove some 24,000 pieces of Chinese-made communications equipment—but according to a July 15 update from the commission, it is more than $3 billion short of the money it needs to reimburse all eligible companies.

Absent more money from Congress, the FCC says it plans to begin reimbursing approved companies for about 40 percent of the costs of removing Huawei equipment. The FCC did not specify a timeframe on when the money will be disbursed.

In late 2020, the Justice Department referred its national security concerns about Huawei equipment to the Commerce Department, and provided information on where the equipment was in place in the US, a former senior US law enforcement official told CNN.

After the Biden administration took office in 2021, the Commerce Department then opened its own probe into Huawei to determine if more urgent action was needed to expunge the Chinese technology provider from US telecom networks, the former law enforcement official and a current senior US official said.

That probe has proceeded slowly and is ongoing, the current US official said. Among the concerns that national security officials noted was that external communication from the Huawei equipment that occurs when software is updated, for example, could be exploited by the Chinese government.

Depending on what the Commerce Department finds, US telecom carriers could be forced to quickly remove Huawei equipment or face fines or other penalties.

Reuters first reported the existence of the Commerce Department probe.
“We cannot confirm or deny ongoing investigations, but we are committed to securing our information and communications technology and services supply chain. Protecting US persons safety and security against malign information collection is vital to protecting our economy and national security,” a Commerce Department spokesperson said.

US counterintelligence officials have recently made a priority of publicizing threats from China. This month, the US National Counterintelligence and Security Center issued a warning to American businesses and local and state governments about what it says are disguised efforts by China to manipulate them to influence US policy.

FBI Director Christopher Wray just traveled to London for a joint meeting with top British law enforcement officials to call attention to the Chinese threats.

In an exclusive interview with CNN, Wray said the FBI opens a new China counterintelligence investigation every 12 hours. “That’s probably about 2,000 or so investigations,” said Wray. “And that’s not even talking about their cyber theft, where they have a bigger hacking program than that of every other major nation combined, and have stolen more of Americans’ personal and corporate data than every nation combined.”

Asked why after years of national security concerns raised over Huawei, the equipment is still largely in place atop cell towers near US military bases, Wray said that, “We’re concerned about allowing any company that is beholden to a nation state that doesn’t adhere to and share our values, giving that company the ability to burrow into our telecommunications infrastructure.”

He noted that in 2020, the DOJ indicted Huawei with racketeering conspiracy and conspiracy to steal trade secrets.

“And I think that’s probably about all I can say on the topic,” said Wray.


Critics see xenophobic overreach

Despite its tough talk, the US government’s refusal to provide evidence to back up its claims that Huawei tech poses a risk to US national security has led some critics to accuse it of xenophobic overreach. The lack of a smoking gun also raises questions of whether US officials can separate legitimate Chinese investment from espionage.

“All of our products imported to the US have been tested and certified by the FCC before being deployed there,” Huawei said in its statement to CNN. “Our equipment only operates on the spectrum allocated by the FCC for commercial use. This means it cannot access any spectrum allocated to the DOD.”

“For more than 30 years, Huawei has maintained a proven track record in cyber security and we have never been involved in any malicious cyber security incidents,” the statement said.

In its zeal to sniff out evidence of Chinese spying, critics argue the feds have cast too wide a net — in particular as it relates to academic institutions. In one recent high-profile case, a federal judge acquitted a former University of Tennessee engineering professor whom the Justice Department had prosecuted under its so-called China Initiative that targets Chinese spying, arguing “there was no evidence presented that [the professor] ever collaborated with a Chinese university in conducting NASA-funded research.”
And on Jan. 20, the Justice Department dropped a separate case against an MIT professor accused of hiding his ties to China, saying it could no longer prove its case. In February, the Biden administration shut down the China Initiative entirely.
The federal government’s reticence across multiple administrations to detail what it knows has led some critics to accuse the government of chasing ghosts.

“It really comes down to: do you treat China as a neutral actor — because if you treat China as a neutral actor, then yeah, this seems crazy, that there’s some plot behind every tree,” said Anna Puglisi, a senior fellow at Georgetown University’s Center for Security and Emerging Technology. “However, China has shown us through its policies and actions it is not a neutral actor.”


Chinese tech in the American heartland

As early as the Obama administration, FBI agents were monitoring a disturbing pattern along stretches of Interstate 25 in Colorado and Montana, and on arteries into Nebraska. The heavily trafficked corridor connects some of the most secretive military installations in the US, including an archipelago of nuclear missile silos.

For years, small, rural telecom providers had been installing cheaper, Chinese-made routers and other technology atop cell towers up and down I-25 and elsewhere in the region. Across much of these sparsely populated swaths of the west, these smaller carriers are the only option for cell coverage. And many of them turned to Huawei for cheaper, reliable equipment.

Beginning in late 2011, Viaero, the largest regional provider in the area, inked a contract with Huawei to provide the equipment for its upgrade to 3G. A decade later, it has Huawei tech installed across its entire fleet of towers, roughly 1,000 spread over five western states.

As Huawei equipment began to proliferate near US military bases, federal investigators started taking notice, sources familiar with the matter told CNN. Of particular concern was that Huawei was routinely selling cheap equipment to rural providers in cases that appeared to be unprofitable for Huawei — but which placed its equipment near military assets.

Federal investigators initially began “examining [Huawei] less from a technical lens and more from a business/financial view,” explained John Lenkart, a former senior FBI agent focused on counterintelligence issues related to China. Officials studied where Huawei sales efforts were most concentrated and looked for deals that “made no sense from a return-on-investment perspective,” Lenkart said.

“A lot of [counterintelligence] concerns were uncovered based on” those searches, Lenkart said.

By examining the Huawei equipment themselves, FBI investigators determined it could recognize and disrupt DOD-spectrum communications — even though it had been certified by the FCC, according to a source familiar with the investigation.

“It’s not technically hard to make a device that complies with the FCC that listens to nonpublic bands but then is quietly waiting for some activation trigger to listen to other bands,” said Eduardo Rojas, who leads the radio spectrum lab at Embry-Riddle Aeronautical University in Florida. “Technically, it’s feasible.”

To prove a device had clandestine capabilities, Rojas said, would require technical experts to strip down a device “to the semi-conductor level” and “reverse engineer the design.” But, he said, it can be done.

And there was another big concern along I-25, sources familiar with the investigation said.


Weather camera worries

Around 2014, Viaero started mounting high-definition surveillance cameras on its towers to live-stream weather and traffic, a public service it shared with local news organizations. With dozens of cameras posted up and down I-25, the cameras provided a 24-7 bird’s eye view of traffic and incoming weather, even providing advance warning of tornadoes.

But they were also inadvertently capturing the movement of US military equipment and personnel, giving Beijing — or anyone for that matter — the ability to track the pattern of activity between a series of closely guarded military facilities.

The intelligence community determined the publicly posted live-streams were being viewed and likely captured from China, according to three sources familiar with the matter. Two sources briefed on the investigation at the time said officials believed that it was possible for Beijing’s intelligence service to “task” the cameras — hack into the network and control where they pointed. At least some of the cameras in question were running on Huawei networks.

Viaero CEO Frank DiRico said it never occurred to him the cameras could be a national security risk.

“There’s a lot of missile silos in areas we cover. There is some military presence,” DiRico said in an interview from his Colorado office. But, he said, “I was never told to remove the equipment or to make any changes.”

In fact, DiRico first learned of government concerns about Huawei equipment from newspaper articles — not the FBI — and says he has never been briefed on the matter.

DiRico doesn’t question the government’s insistence that he needs to remove Huawei equipment, but he is skeptical that China’s intelligence services can exploit either the Huawei hardware itself or the camera equipment.

“We monitor our network pretty good,” DiRico said, adding that Viaero took over the support and maintenance for its own networks from Huawei shortly after installation. “We feel we’ve got a pretty good idea if there’s anything going on that’s inappropriate.”


Scouring the country for Chinese investments

By the time the I-25 investigation was briefed to the White House in 2019, counterintelligence officials begin looking for other places Chinese companies might be buying land or offering to develop a piece of municipal property, like a park or an old factory, sometimes as part of a “sister city” arrangement.

In one instance, officials shut down what they believed was a risky commercial deal near highly sensitive military testing installations in Utah sometime after the beginning of the I-25 investigation, according to one former US official. The military has a test and training range for hypersonic weapons in Utah, among other things. Sources declined to provide more details.

Federal officials were also alarmed by what  sources described as a host of espionage and influence activities in Houston and, in 2020, shut down the Chinese  consulate there.

Bill Evanina, who until early last year ran the National Counterintelligence and Security Center, told CNN that it can sometimes be hard to differentiate between a legitimate business opportunity and espionage — in part because both might be happening at the same time.

“What we’ve seen is legitimate companies that are three times removed from Beijing buy [a given] facility for obvious logical reasons, unaware of what the [Chinese] intelligence apparatus wants in that parcel [of land],” Evanina said. “What we’ve seen recently — it’s been what’s underneath the land.”

“The hard part is, that’s legitimate business, and what city or town is not going to want to take that money for that land when it’s just sitting there doing nothing?” he added.


A complicated problem

After the results of the I-25 investigation were briefed to the Trump White House in 2019, the FCC ordered that  telecom companies who receive federal subsidies to provide cell service to remote areas — companies like Viaero — must “rip and replace” their Huawei and ZTE equipment.

The FCC has since said that the cost could be more than double the $1.9 billion appropriated in 2020 and absent an additional appropriation from Congress, the agency is only planning to reimburse companies for a fraction of their costs.

Given the staggering strategic risk, Lenkart said, “rip and replace is a very blunt and inefficient remediation.”

DiRico, the CEO of Viaero, said the cost of “rip and replace” is astronomical and that he doesn’t expect the reimbursement money to be enough to pay for the change. According to the FCC, Viaero is expected to receive less than half of the funding it is actually due. Still, he expects to start removing the equipment within the next year.

“It’s difficult and it’s a lot of money,” DiRico said.

Some former counterintelligence officials expressed frustration that the US government isn’t providing more granular detail about what it knows to companies — or to cities and states considering a Chinese investment proposal. They believe that not only would that kind of detail help private industry and state and local governments understand the seriousness of the threat as they see it, but also help combat the criticism that the US government is targeting Chinese companies and people, rather than Chinese state-run espionage.

“This government has to do a better job of letting everyone know this is a Communist Party issue, it’s not a Chinese people issue,” Evanina said. “And I’ll be the first to say that the government has to do better with respect to understanding the Communist Party’s intentions are not the same intentions of the Chinese people.”

A current FBI official said the bureau is giving more defensive briefings to US businesses, academic institutions and state and local governments that include far more detail than in the past, but officials are still fighting an uphill battle.

“Sometimes I feel like we’re a lifeguard going out to a drowning person, and they don’t want our help,” said the current FBI official.  But, this person said, “I think sometimes we [the FBI] say ‘China threat,’ and we take for granted what all that means in our head. And it means something else to the people that we’re delivering it to.”

“I think we just need to be more careful about how we speak about it and educate folks on why we’re doing what we’re doing.”

In the meantime, the “rip and replace” program has remained fiercely controversial.

“It’s not going to be easy,” DiRico said. “I’m going to be up nights worrying about it, but we’ll do what we’re told to do.”

[Note: multiple hyperlinks found at linked website article.]

======================

Senate investigation reveals China’s effort to infiltrate Federal Reserve

By Stephen Dinan - The Washington Times - Tuesday, July 26, 2022

China is trying to recruit U.S.-based economists to feed information back to Chinese officials and has even managed to place cooperating sources inside the Federal Reserve banking system, according to a Senate report released Tuesday.

One employee provided information on the Fed’s economic modeling to a Chinese university. Another, who had connections with China’s international recruitment network, tried to send large sets of data from the Fed to an external site, according to the report by Republicans on the Senate Homeland Security and Governmental Affairs Committee.

Yet another employee kept tabs on arrests of accused Chinese collaborators and used “xijinping” — the name of China’s president — as a website password.

Investigators said the Fed identified 13 people of “potential concern” in eight of the reserve’s 12 banks.

Sen. Rob Portman of Ohio, the top Republican on the committee, said the report follows an investigation that exposed China’s efforts to burrow operatives in the heart of America’s science and technology communities.

‌
His investigators turned up one incident in which a Federal Reserve employee traveling to China was detained by Chinese officials on four occasions. The person’s family was threatened if the employee didn’t start leaking economic information.

“I am concerned by the threat to the Fed and hope our investigation, which is based on the Fed’s own documents and corresponds with assessments and recommendations made by the FBI, wakes the Fed up to the broad threat from China to our monetary policy,” the Ohio Republican said in announcing the report.

He said the Fed lacked the wherewithal to track and respond to China’s attempts.

Federal Reserve Chair Jerome Powell vehemently disputed the findings. He said the system has “robust” safeguards to protect its information and that employees are required to affirm they are following the rules.

“I assure you that everything we do at the Federal Reserve is in service to our public mission to American households, businesses and communities,” Mr. Powell wrote in a letter Monday to Mr. Portman.

He said the Fed shares modeling information and works with experts around the world. Still, he said, technology guards against unauthorized data releases.

Mr. Portman released the report amid rising tensions between the U.S. and China.

House Speaker Nancy Pelosi, California Democrat, is planning a visit to Taiwan, although the Biden administration says China is threatening retaliation if she makes the trip. U.S. officials believe China is building its military capability for an attempt to capture Taiwan.

The Chinese Foreign Ministry said this month that the communist country will take “resolute and strong measures” if Mrs. Pelosi visits the island.

Meanwhile, Mr. Portman and other U.S. officials are shining a spotlight on Chinese efforts to tunnel into America’s research industry.

The focus has chiefly been on China’s Confucius Institutes and its Thousand Talents Plan. The institutes were cultural education centers that American officials saw as propaganda machines. The talent program recruited American researchers to siphon information and technology to China, according to a 2019 investigation led by Mr. Portman and Sen. Thomas R. Carper, Delaware Democrat.

In the Senate report, Mr. Portman’s investigators say China’s interests run deep into America’s economy, too.

Most pointed was the attempt to pressure a senior bank official who was part of China’s Thousand Talents Plan. In 2019, the man was detained while traveling in China, where interrogators demanded he share secret Fed data.

The man told investigators that his handlers tried to get him drunk to pry more information from him.

Yet another Fed employee provided economic modeling code to Peking University.

The Federal Reserve flagged the employees’ behavior but concluded that it didn’t break policy.

A 2020 attempt by the FBI to suggest better practices for weeding out foreign influence fell on deaf ears, investigators said.

Stephen Dinan can be reached at sdinan@washingtontimes.com.

On page 1 of this thread there were some members who expressed doubt that bio-weapons designed to target specific ethnicities were a possibility, but now we see both a Congressional Intelligence committee member as well as Gordon Chang, an expert on China, whose analyses I've grown to consider reliable, both warning this very thing.

[Note: an embedded video of Rep. Crow's remarks, hyperlinks, and photos found at linked website article]

==============

Intelligence Committee Member Issues Warning on Possible Threat Targeting Americans’ DNA

Jul 24, 2022 Jack Phillips

A Democrat on the House Intelligence Committee has warned Americans to not use DNA testing services because their data could be collected to create bioweapons targeting individuals or groups.

“You can’t have a discussion about this without talking about privacy and the protection of commercial data because expectations of privacy have degraded over the last 20 years,” Rep. Jason Crow (D-Colo.) said during a panel discussion in Colorado. “Young folks actually have very little expectation of privacy, that’s what the polling and the data show.”

"People will very rapidly spit into a cup and send it to 23andMe and get really interesting data about their background,” he added, making reference to a popular DNA testing and ancestry service.

But governments can “actually take someone’s DNA … you know, their medical profile and you can target a biological weapon that will kill that person or take them off the battlefield or make them inoperable,” Crow added, saying that companies such as 23andMe can sell a person’s DNA.

“And guess what? Their DNA is now owned by a private company. It can be sold off with very little intellectual property protection or privacy protection and we don’t have legal and regulatory regimes to deal with that,” he said alongside Sen. Joni Ernst (R-Iowa), who is a member of the Senate Armed Services Committee, at the Aspen Security Forum on Friday.

Officials have to have a “public discussion” about the protection of DNA information, healthcare information, and related data as such data can “be procured and collected by our adversaries for the development of these systems,” the congressman added, referring to biological weapons.

The company previously denied selling private information, including DNA, of its customers. The Epoch Times has contacted 23andMe for comment.

China, Russia Collecting American DNA

About a year ago, Sen. Marco Rubio (R-Fla.) issued a warning that Chinese and Russian laboratories were processing the DNA tests of Americans via Medicare and Medicaid.

“It is ridiculous that our current policies enable the Chinese Communist Party to access Americans’ genomic data,” he said in a statement in July 2021. “There is absolutely no reason that Beijing, which routinely seeks to undermine US national security, should be handed the genomic data of American citizens.”

Last year, some federal intelligence officials said in a report that they believe COVID-19 likely emerged from a high-security laboratory in Wuhan, China, in late 2019. Meanwhile, the National Institutes of Health has drawn congressional scrutiny over funds it provided to a third-party to allegedly carry out controversial gain-of-function research on bat coronaviruses at the Wuhan Institute of Virology.

During the panel discussion, Ernst said U.S. adversaries could also open up a new battlefront against the United States by targeting food supplies on a vast scale via biological weapons.

“If we look at food security and what can our adversaries do with biological weapons that are directed at our animal agriculture, at our agricultural sector … highly pathogenic avian influenza, African swine fever,” she said. “All of these things have circulated around the globe, but if targeted by an adversary, we know that it brings about food insecurity. Food insecurity drives a lot of other insecurities around the globe.”

From The Epoch Times

==============

@ 4 minute video


https://rumble.com/vx1bha-gord...ing-bio-weapons.html

@ 15 minute video. The entire interview is worth watching but the bio-weapons portion starts @ the 9:35 mark.


https://rumble.com/v1dl7zx-cou...h-sebastian-gor.html

Yup, still just as crazy. The congressman mentioned a weapon targeted at a unique individual. That’s theoretically possible. Certain things could make that much easier, which I’m not going to mention, but a bullet is a much easier method.

Not going to discuss more details. Before ice cream, I was going into biotech, mainly bacteriophage (a type of virus) and double majored at A&M in biochemistry and genetics.

Targeting a food supply is a valid concern. Again, it would be a doomsday weapon, but the ag crowd is worried about monoculture more from disease than attack. (Hence seed banks, the work to preserve rare strains etc)

Wiping out every Holstein, or Hereford with a bio weapon wouldn’t be that hard, but why? And, there’s a, very, small chance of it jumping.

As long as people keep treating first gen Han/Han immigrants like normal people, we will keep being penetrated.

Once we accept that the Han are a reincarnation of the NAZIs, we might be able to make progress against them.

The sale of your DNA data is a significant privacy concern, though.

Not sure how it’s not covered under HIPAA

Given the whole “Han master race” thing, they might be searching for some way to identify “true Hans” or someway to find a genetic aspect which they could use in place of a vaccine, if they use a bio weapon.

I think the Han leadership could be deluded enough to accept going back to prehistoric tech/might think they could hold onto 19th century tech, if they got to kill off everyone else/especially non-Han Chinese.

The Chinese government is the enemy of the entire world at this point; they will be the ones that precipitate the start of WW3 (some could argue that they already have and it’s a simple matter of time before actual shots are fired). In light of recent events, anyone that sends their DNA off to “find out who they are” is a fool.

An even more frightening premise to me is how many of us have had our DNA compromised through less overt avenues? If you’ve had blood drawn at any institution or circumstance, who’s to say it hasn’t been surreptitiously collected and stored for future use against us by our enemies? After the last couple of years, I do not trust ANYONE and our own government is at the top of the list.

This is a LONG but interesting article on a Chinese criminal money laundering operation working with Mexican drug cartels that easily warrants a separate thread, but because it is tied to the Chinese Communist Party and Chinese banking, I believe it has a place in the discussion of the threat China poses.

There are several elements in this article that could have been pulled straight from the movie Miami Vice.

[Note: multiple hyperlinks, dramatic illustrations, and a chart diagraming the details of how this sophisticated operation worked can be found at linked website article.]

My emphasis added in bold.

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How a Chinese American Gangster Transformed Money Laundering for Drug Cartels

Xizhi Li pioneered a new method that enriched Latin American drug lords and China’s elite. A DEA investigation found the Chinese government may have been involved.

by Sebastian Rotella and Kirsten Berg
Oct. 11, 5 a.m. EDT

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up to receive our biggest stories as soon as they’re published. This is part one of an investigation into a revolutionary money laundering system involving Chinese organized crime, Latin American drug cartels and Chinese officials, and how one major figure in the scheme managed to meet former President Donald Trump. Read part two: “The Globetrotting Con Man and Suspected Spy Who Met With President Trump.”

In 2017, Drug Enforcement Administration agents following the money from cocaine deals in Memphis, Tennessee, identified a mysterious figure in Mexico entrusted by drug lords with their millions: a Chinese American gangster named Xizhi Li.

As the agents tracked Li’s activity across the Americas and Asia, they realized he wasn’t just another money launderer. He was a pioneer. Operating with the acumen of a financier and the tradecraft of a spy, he had helped devise an innovative system that revolutionized the drug underworld and fortified the cartels.

Li hit on a better way to address a problem that has long bedeviled the world’s drug lords: how to turn the mountains of grimy twenties and hundreds amassed on U.S. streets into legitimate fortunes they can spend on yachts, mansions, weapons, technology and bribes to police and politicians.

For years, the Mexican cartels that supply the U.S. market with cocaine, heroin and fentanyl smuggled truckloads of bulk cash to Mexico, where they used banks and exchange houses to move the money into the financial system. And they also hired middlemen — often Colombian or Lebanese specialists who charged as much as 18 cents on the dollar — to launder their billions.

Those methods were costly, took weeks or even months to complete and exposed the stockpiled cash to risks — damage, robbery, confiscation.

Enter Li. About six years ago, federal antidrug agents in Chicago saw early signs of what would become a tectonic change. They trailed cartel operatives transporting drug cash to a new destination: Chinatown, an immigrant enclave in the flatlands about 2 miles south of the city’s rampart of lakefront skyscrapers.

Agents on stakeout watched as cartel operatives delivered suitcases full of cash to Chinese couriers directed by Li. Furtive exchanges took place in motels and parking lots. The couriers didn’t have criminal records or carry guns; they were students, waiters, drivers. Neither side spoke much English, so they used a prearranged signal: a photo of a serial number on a dollar bill.

After the handoff, the couriers alerted their Chinese bosses in Mexico, who quickly sent pesos to the bank accounts or safe houses of Mexican drug lords. Li then executed a chain of transactions through China, the United States and Latin America to launder the dollars. His powerful international connections made his service cheap, fast and efficient; he even guaranteed free replacement of cartel cash lost in transit. Li and his fellow Chinese money launderers married market forces: drug lords wanting to get rid of dollars and a Chinese elite desperate to acquire dollars. The new model blew away the competition.

“At no time in the history of organized crime is there an example where a revenue stream has been taken over like this, and without a shot being fired,” said retired DEA agent Thomas Cindric, a veteran of the elite Special Operations Division. “This has enriched the Mexican cartels beyond their wildest dreams.”

As they investigated Li’s tangled financial dealings, U.S. agents came across evidence indicating that his money laundering schemes involved Chinese government officials and the Communist Party elite. China’s omnipresent security forces tightly control and monitor its state-run economy. Yet Li and others moved tens of millions of dollars among Chinese banks and companies with seeming impunity, according to court documents and national security officials. The criminal rings exploited a landscape in which more than $3.8 trillion of capital has left China since 2006, making the country the world’s top “exporter of hot money,” said John Cassara, a former U.S. Treasury Department investigator, in testimony to a Canadian commission of inquiry.

Adm. Craig Faller, a senior U.S. military leader, told Congress last year that Chinese launderers had emerged as the “No. 1 underwriter” of drug trafficking in the Western Hemisphere. The Chinese government is “at least tacitly supporting” the laundering activity, testified Faller, who led the U.S. Southern Command, which oversees military activity in Latin America.

In an interview with ProPublica, the now-retired Faller elaborated on his little-noticed testimony. He said China has “the world’s largest and most sophisticated state security apparatus. So there’s no doubt that they have the ability to stop things if they want to. They don’t have any desire to stop this. There’s a lot of theories as to why they don’t. But it is certainly aided and abetted by the attitude and way that the People’s Republic of China views the globe.”

Some U.S. officials go further, arguing that Chinese authorities have decided as a matter of policy to foster the drug trade in the Americas in order to destabilize the region and spread corruption, addiction and death here.

“We suspected a Chinese ideological and strategic motivation behind the drug and money activity,” said former senior FBI official Frank Montoya Jr., who served as a top counterintelligence official at the Office of the Director of National Intelligence. “To fan the flames of hate and division. The Chinese have seen the advantages of the drug trade. If fentanyl helps them and hurts this country, why not?

More than half a dozen national security veterans interviewed by ProPublica expressed similar views, most of them speaking on the condition of anonymity because of the sensitive subject. But they acknowledged that the alleged state complicity is difficult to prove.

Beijing rejects such accusations. And the question of whether China actively supports money laundering and the flow of fentanyl and other drugs to the U.S. remains a matter of debate in the U.S. national security community.

“There is so much corruption today in mainland China it becomes hard to distinguish a policy or campaign from generalized criminality,” said an Asian American former intelligence official with long experience on Chinese crime and espionage.

The Chinese embassy in Washington did not respond to a detailed request for comment for this story.

The takeover of drug-related money laundering by Chinese organized crime has drawn global attention. In Australia, authorities are investigating a Chinese syndicate that allegedly moved hundreds of millions of dollars around the world for clients, including a cousin of Chinese President Xi Jinping, according to news reports. (Xi’s cousin has not been charged with a crime, and the Chinese foreign ministry has dismissed reports about inquiries into his activities as “gossip.”)

Europol has warned that Chinese money laundering groups “present a growing threat to Europe.” The U.S. State Department estimates that $154 billion in illicit funds a year passes through China, calling it “of great concern.”

“We used to have a regular dialogue with the Chinese specifically on things like money laundering, counternarcotics policies,” Assistant Secretary Todd Robinson, who leads the Bureau of International Narcotics and Law Enforcement Affairs, said in an interview. “And since that has stopped, it has not been clear, we’ve not really been able to get a handle on how much of this is criminal organizations and how much of it is criminal organizations connected to or suborning Chinese government officials.”

Xi has led a well-publicized crusade against corruption, but it has been mainly a purge of rivals, according to U.S. national security officials and Chinese dissidents. In fact, they said, Chinese intelligence services have quietly expanded their ties with Chinese mafias, known as triads, for mutual benefit.

“There is no question there is interconnectivity between Chinese organized crime and the Chinese state,” said Montoya. “The party operates in organized crime-type fashion. There are parallels to Russia, where organized crime has been co-opted by the Russian government and Putin’s security services.”

The Li case led federal agents in an unexpected direction: an investigation of a possible Chinese covert operation to penetrate American politics. The DEA agents stumbled across Li’s enigmatic associate, an expatriate Chinese businessman named Tao Liu. After moving from Mexico to New York, he launched a high-rolling quest for political influence that included at least two meetings with President Donald Trump.


Xizhi Li’s associate, Tao Liu (right), met twice with President Donald Trump in 2018.

Both the DEA and FBI pursued Liu, suspecting he had ties to Chinese spy agencies. They wanted to know how and why a wanted Chinese criminal had gained access to the president of the United States.

Although authorities convicted Li and Liu of money laundering and other crimes, the political and diplomatic aspects of the groundbreaking investigations of them are still largely secret. Citing open investigations, the DEA declined to discuss the case or even the general issue of how Chinese organized crime launders profits for the cartels. The Justice Department and FBI declined requests for comment. Lawyers who represented Li rejected requests for interviews with them or their client.

To explore the full dimensions of the case, ProPublica interviewed more than two dozen current and former national security officials, as well as lawyers and others involved. ProPublica granted some of them anonymity, either because they were not authorized to talk publicly or because of concerns about their security. ProPublica also reviewed court files, social media, governmental reports and other material. Many details — about the suspected role of Chinese officials, the hunt across the globe, the links to U.S. politics — are being reported for the first time.


The Aura of Juan Lee

In 2008, Rigo Polanco met a cocaine trafficker who called himself Juan Lee. It was one of 17 aliases that Xizhi Li accumulated in a criminal career that was just getting started.

Polanco, a California anti-drug agent, had spent weeks undercover stalking Li, who was looking for a high-volume supplier. But the guy was a ghost. He used multiple phones. He hid behind intermediaries. Finally, he agreed to meet Polanco at a Denny’s by the Pomona Freeway in the suburban sprawl of the San Gabriel Valley.

On June 24, Polanco’s Los Angeles County task force deployed surveillance around the diner. Polanco introduced himself as Alfredo, a corrupt Customs and Border Protection officer with access to cocaine. He sat down with Li, Li’s 25-year-old Mexican American wife and her brother.

At 35, Li stood 5-foot-7 and weighed about 135 pounds. But he was imposing. He spoke fluent, Mexican-accented Spanish, wore a Rolex and emanated menace.

“The aura of Juan Lee among the people around him was, ‘Don’t cross this guy,’” Polanco recalled in an interview. “There was some sense of fear of him among his associates.”

Li grew up in a unique subculture where crime spoke many languages and crossed borders with ease. The experience served him well.

He was born in a rural area of Guangdong province in 1973. About 10 years later, the family migrated to Mexicali, a Mexican city on the California border that is home to a large Chinese community. Chinese restaurants fill La Chinesca, the Chinatown. In the early 20th century, an underground tunnel complex was a refuge from the desert heat — and a site for gambling and cross-border crime schemes.

Li attended school and worked long shifts in a family restaurant. But one of his close relatives smuggled migrants and contraband into the United States, former investigators say. When Li was about 16, his family migrated to Southern California. He slid into crime in the 1990s and with help from relatives became an associate of the 14K triad, a Chinese criminal organization, according to law enforcement documents and former investigators.

Li obtained U.S. citizenship and had four children with a Chinese-born woman. In 2005, he opened the Lucky City Restaurant in the suburb of Monterey Park in Los Angeles County. The restaurant quickly became a den of drug trafficking and human smuggling, according to an affidavit written by a DEA investigator and sources familiar with the case.

By then, Li’s triad and family connections had helped him cultivate relationships with Chinese officials with diplomatic status in the United States, according to former investigators. He also recruited a corrupt U.S. border inspector to help with smuggling, according to law enforcement documents and former investigators.

Li’s hectic life bridged the Latino and Asian communities. He had two children with his Mexican American wife, whose family had useful cartel connections, according to interviews and court documents.

At the same time, Li maintained ties to his birthplace. Around 2007, he took Chinese relatives to Guangdong for the Qingming Festival, when families clean the tombs of their ancestors. Basking in the role of benevolent immigrant, he “funded the renovation of our village, transforming the muddy land into streets,” his sister wrote to a federal judge years later.

Back in the smoggy San Gabriel Valley, his prolific criminal activity drew investigations by the DEA and FBI. But Polanco’s team of Los Angeles County officers didn’t know about those open cases when they went after him in 2008.

During a second meeting at a seafood restaurant, Li told Polanco that he was smuggling 30-kilogram loads of cocaine through Mexico to Hong Kong, making $60,000 a kilogram. He also sent cocaine to Canada. And he had a sideline smuggling Chinese migrants through Cuba.

This is no run-of-the-mill thug, Polanco thought. Mexico was violent. Cuba was a police state. Canada and Hong Kong were hotbeds of Chinese organized crime. You needed well-placed allies to navigate among those cultures and countries.

“It all added up to this picture of a very shrewd and cautious and sophisticated operator,” Polanco said. “There was a lot of sophistication in what he was doing, even then.”

After negotiations with the undercover agent, Li agreed to buy an initial 20 kilograms of cocaine. On July 14, he sent a young Asian man in a Mercedes to a supermarket parking lot to deliver $200,000. Polanco’s team captured the bagman and other accomplices. The bagman and Li’s brother-in-law pleaded guilty to drug trafficking offenses, while charges against the wife were dropped.

But Li fled south across the border. He soon proved Polanco’s instincts correct.


Chinaloa

In Mexico City, Li rebounded fast.

Qiyun Chen was from his hometown and worked in her family’s retail business. Only in her early 20s, she became his romantic and criminal partner, according to court documents and former investigators. Her charm and intelligence impressed gangsters and cops alike. (Chen could not be reached for comment.)

Chen introduced Li to her own network in the Chinese Mexican community, including a formidable trafficker known as the Iron Lady. In her online communications, Chen called herself Chinaloa. The alias fused the words China and Sinaloa, the state that has spawned many drug lords. It baptized her as a player in a multilingual subculture that she and Li created. Their text messages combined Chinese and Spanish. Li used the online handles JL 007 and Organización Diplomática (Diplomatic Organization).

The couple divided their time among luxurious homes in Mexico City, Cancun and Guatemala, making good money smuggling drugs and migrants. But they saw a new opportunity in money laundering.

In 2011, Li went to Guatemala City to buy a casino. Located in a Holiday Inn, it had a ’90s-era decor that didn’t exactly conjure images of James Bond in Monte Carlo.

Nonetheless, Li struck an all-inclusive deal with the owner. He bought his casino, his casino license — and his identity. The U.S. fugitive became a Guatemalan gambling entrepreneur, according to court documents.

Along the way, Li had developed a complementary racket: selling fraudulent documents. Li himself had five passports from three countries. The fake papers were professionally done. Li infiltrated corrupt Latin American bureaucracies that sell real passports, identity cards, even birth certificates. He also had a government-connected source for passports in Hong Kong. Li charged about $15,000 per document, according to interviews and court files.

The same year Li bought the casino, a cafe owner in Mexico City introduced him to a wealthy Chinese expatriate who wanted a Guatemalan passport. The new arrival was a portly, baggy-faced 35-year-old named Tao Liu. It proved a providential encounter.

Li took his client in a private helicopter to the southernmost Mexican state of Chiapas. They landed in the jungle and trudged across the border into Guatemala.

“Bodyguards with weapons and vehicles were waiting on the other side,” said Liu’s lawyer, Jonathan Simms. “They take them to Li’s mansion in Guatemala. Li leaves him there and goes to get the passports. Tao spent time in that mansion waiting with other Chinese clients for Li to bring back the documents. He got to know the other people there pretty well.”

While at the safe house, Liu met a senior Chinese military officer who also bought a fraudulent document from Li, Simms said. Years later, Liu identified the officer in a photo shown to him by U.S. agents.

Investigators say that episode contributed to evidence that Li provided fake papers, and other criminal services, to Chinese officials in Latin America, where China is an economic and diplomatic power. Foreign passports and multiple identities enable Chinese operatives overseas to engage in covert activity, launder money or take refuge from their government if accused of corruption.

The national security threat posed by Li’s passport racket later caused the DEA to bring in the State Department’s Diplomatic Security Service to conduct its own investigation, which continues today.

After the Guatemala expedition, Liu and Li became friends. They gambled at the casino and took women to the Bahamas. Although Liu had access to money and power, he was also an admitted brazen lawbreaker. Sometimes his dubious immigration status forced him to enter Mexico by car or bus, and he bragged about bluffing or bribing border officers, according to court documents, his lawyer and law enforcement officials.

The two men did not seem like kindred spirits. Li was thin; Liu was obese. Li was reserved; Liu was gregarious. It is hard to find photos of Li; Liu bombarded social media with scenes of his extravagant lifestyle.

But they were both globetrotting outlaws. And Liu played a crucial early role in building Li’s empire, according to current and former law enforcement officials and other sources. A U.S. indictment later alleged: “TAO [Liu] worked with LI to begin money laundering in locations including Mexico and Guatemala.”

In later conversations recorded by the DEA, Liu described himself as an influential mentor who taught Li how to launder money, according to court documents and interviews. Liu’s lawyer argued that his client’s admissions were exaggerations. But the investigators tended to believe Liu’s account.

“The DEA thought that they were partners in the money laundering,” a former national security official said. “And they were definitely working closely together.”

Investigators believe Liu used his connections in China and the diaspora to recruit rich people who needed U.S. dollars. A sign of Liu’s access to that underworld: he had another associate in Hong Kong, known as “the queen of underground banking,” who provided black market money services to the Chinese elite, according to Chinese court documents and press reports.

Stocked with cash and guns, Li’s Guatemalan casino became a base of his emerging venture. He started bringing Chinese nationals to the casino: some of them politically connected, others corrupt officials, others expatriates, according to interviews and court documents. They mingled with Latin American drug traffickers, the second essential element in his scheme. The casino was a showcase to demonstrate to both sides that Li could deliver, court documents say.

The wealthy Chinese “had a need,” Simms said. “The cartels had a need. Li put it together.”


Mirror Transactions

Many ethnic diasporas have developed informal systems for moving money and funneling cash — earned honestly or illegally — into the legitimate international economy.

For decades, underground banking systems served the elite of the Chinese Communist Party, or CCP, especially after the totalitarian regime opened its command economy to global capitalism. Starting around 2013, Xi’s anti-corruption crusade pushed the elite to spirit more money overseas. A yearly limit of $50,000 on capital flight increased a demand for U.S. dollars.

“The underground banking system in China was pretty much self-sufficient just dealing with Chinese criminal organizations and the Chinese diaspora,” said John Tobon, the Homeland Security Investigations special agent in charge in Honolulu, who has written on the topic. “And it was then when all of these restrictions came in, when the CCP members could no longer count on doing it the easy way ... that the supply of dollars became an issue.”

Li and other enterprising criminals identified a seemingly limitless source of dollars: the Latin American drug trade. To amass the cash, Li offered the cartels unheard-of money laundering deals.

“With the Colombians, it had been an 18% to 13% commission,” said Cindric, the retired DEA agent. “The Chinese are doing it for 1 to 2% on average. And the speed at which they do it is unbelievable. The Chinese absorbed the risk. You know it will get paid.”

Li deployed dozens of couriers from Los Angeles to Atlanta. Just two couriers in Chicago picked up more than $10 million from cartel operatives in a seven-month period between 2016 and 2017, according to law enforcement documents.

“We saw the Chinese enter the market,” said Daniel Morro, a former senior HSI official in Chicago. “It was super-intriguing. We had never seen it before.”

If the couriers delivered, they collected a 1% fee. If not, they were on the hook with Li.

On March 11, 2016, Nebraska state troopers stopped a rental car on a desolate highway. They confiscated $340,000 and released the two couriers, who were driving from Chicago to Los Angeles. A courier called Li, who called a cartel representative in Mexico and sent a bank transfer to replace the lost load. The courier and his relatives rapidly reimbursed Li by depositing money in U.S. bank accounts, court documents say.

“He was a hard-ass,” said Michael Ciesliga, a former DEA investigator. “No nonsense. All business. Very strict, very hard even on his family.”

Li’s system generally worked like this: Cartel operatives in the United States would arrange a “contract” with him, often to launder about $350,000, a quantity of cash that fit into a suitcase.

Cartel transporters handed over the dollar loads to Li’s couriers, who sent Li or his lieutenants a photo confirming the handoff. Li then delivered the sums in Mexican pesos to drug lords from safe houses in Mexico stocked with that currency. The first stage, providing swift service to the cartels, was complete.

Li’s profits came from other players in the scheme: rich Chinese willing to lose money in order to obtain dollars outside China and Latin American import/export firms needing Chinese currency to do business in China.

Li’s couriers often drove loads of cash to New York or Los Angeles, which have large Chinese immigrant populations. Li “sold” the currency to wealthy Chinese clients or their expatriate relatives or representatives. As part of the deal, Li himself would sometimes turn the dollars into deposits in bank accounts or use front companies to issue cashier’s checks.

But the Chinese clients often had their own options, such as small businesses that handled cash without questions. Another method was gambling at casinos, which readily turned cash into chips. Many clients bought homes or paid U.S. university tuition.

In testimony to a Canadian commission of inquiry in 2020, Cassara, the former investigator at the U.S. Treasury Department, described the frequency of laundering in the U.S. real estate sector.

“Almost 60% of purchases by international clients are made in cash,” Cassara said, citing a report by the National Association of Realtors. “Chinese buyers have been the top foreign buyers in the United States both in units and dollar volume of residential housing for six years straight. ... In the United States, there is little if any customer due diligence by real estate agents.”

The next step in Li’s system took place beyond the sight and reach of U.S. authorities. He directed his wealthy clients to transfer equivalent sums from their Chinese bank accounts to accounts he controlled in China. Known as “mirror transactions,” these transfers enabled Li to “sell” the same money again — this time, as Chinese currency to the Latin American exporters.


How Xizhi Li Used “Mirror Transactions” to Launder Millions of Dollars Across the World

The transactions allowed Li to move millions among Mexico, the United States and China while evading law enforcement and charging steep commissions.

There were variations on the system. Li sometimes washed funds through companies owned by confederates in the United States and Latin America who sold seafood and other goods to China. Taking advantage of the $80 billion in trade between Mexico and China, launderers also sent goods from China to Mexican front companies connected to drug lords. Those companies would sell the products for pesos, creating a legitimate paper trail for money initially earned from the sale of drugs.

Li’s network used Chinese banks including the Industrial and Commercial Bank of China and the Agricultural Bank of China, court documents say. Those state institutions were among the banks that moved millions around the world with little apparent scrutiny in this case and others, according to court documents and interviews. Prosecutors did not accuse any bankers of wrongdoing. But investigators suspect that some bankers looked the other way. (The banks did not respond to requests for comment.)

“They had to know it was illegal,” Ciesliga said. “Just the sheer amount of money, and the volume and consistency and frequency, there’s no legitimate businesses that are moving that kind of money. Any alert anti-money laundering investigator would have detected this kind of activity.”

In other cases, authorities have sanctioned Chinese banks for offenses related to money laundering. In 2016, New York state regulators fined the Agricultural Bank of China $215 million for anti-money laundering violations. A Spanish court in 2020 convicted four Madrid executives of the Industrial and Commercial Bank of China of a brazen setup in which they received tens of millions of euros in cash day and night, and moved the funds illegally back to China. The Bank of China has paid fines and endured criminal penalties in Italy and France for the alleged illegal repatriation of proceeds from tax evasion and customs fraud.

On the streets of the Americas, turf wars and rip-offs were rare among the money laundering crews. But for Li, reality intruded eventually.

In 2016, gunmen ambushed Li near his casino in Guatemala City, shredding his armored Range Rover with more than 20 rounds. He survived unscathed. The attackers got away. Li suspected rival Asian gangsters, according to former investigators and others familiar with the case.

He was deep in treacherous territory.


The Streets of Memphis

By 2017, Li’s empire had grown to span four continents. It operated below the radar, with startling impunity. A Memphis-based U.S. drug agent was about to change that.

Peter Maher was a sharp, voracious investigator who had only been with the DEA a few years, colleagues say. (Maher declined an interview request.) He teamed up with Ciesliga, a Tennessee state agent assigned to a federal task force. As they traced drugs on the streets of Memphis back to their source, they discovered that the Sinaloa cartel of Joaquín “El Chapo” Guzmán was supplying cocaine to a major Memphis drug crew. Markings on cocaine packets pointed at Marisela Flores-Torruco, now 52, a Mexican drug lord known as the Iron Lady.

Maher’s team learned that, because Flores had a Chinese grandparent, her organization was known as “Los Chinos,” or the Chinese. Based in Chiapas, she imported tons of cocaine from Colombia for the Sinaloa cartel, interviews and court documents say. (Flores could not be reached for comment.)

Soon, the agents identified a woman in Mexico who was one of the Iron Lady’s “principal coordinators of illicit money laundering operations,” court documents say.

It was Chen, Li’s paramour, using the handle Chinaloa. The DEA Special Operations Division, which specializes in international cases, began intercepting her communications, according to court documents and interviews. The agents figured out that Chen had introduced Li to Flores, who encouraged other traffickers to launder their money with his organization.

Chen’s communications led the DEA to Li, who was laundering for the Sinaloa and Jalisco New Generation cartels. Tracking his U.S. couriers, agents picked off loads across the country.

In May 2017, agents arrested one of Li’s trusted money managers, a Brooklyn-based mail carrier and Chinese immigrant who had lived in Belize. He recorded about $2 million in illicit transactions in a ledger and sometimes received cash deliveries in his U.S. postal uniform, court documents say. The mail carrier pleaded guilty to conspiracy to launder money and got a 60-month sentence.

The Memphis agents toggled between leads in the U.S. and Mexico as the Iron Lady’s ferocity kept them on alert. When Flores ordered her enforcers to kidnap the family of a man who owed her money, the agents warned Mexican counterparts. Later, she threatened to kill rivals with a bombing at a racetrack, Ciesliga said. DEA agents hurriedly obtained an Interpol warrant, and police arrested Flores in Colombia in July 2017.

Later that month, the agents captured Chen during a visit to Los Angeles. They seized five phones from her, along with airline tickets to visit accomplices in Portland, Oregon, who oversaw more than 251 Chinese bank accounts, according to interviews and court documents.

The next morning, Maher and Ciesliga drove to the Santa Monica Pier. Sitting in their rental car by the Pacific, they scoured Chen’s phones. They hurriedly took screenshots, worried that an accomplice could remotely erase the contents at any moment.

Looking at Chen’s smartphones, the agents were able for the first time to read the suspects’ most sensitive conversations on WeChat, an application for messaging and commerce. WeChat is ubiquitous in China and the Chinese diaspora and impenetrable to U.S. law enforcement. Because it uses a form of partial encryption allowing the company access to content, WeChat is closely monitored by the Chinese state, according to U.S. national security veterans.

U.S. officials view the brazen use of WeChat for money laundering as another suggestive piece of evidence that authorities in Beijing know what is going on.

“It is all happening on WeChat,” Cindric said. “The Chinese government is clearly aware of it. The launderers are not concealing themselves on WeChat.”

Chen’s arrest was a devastating blow to Li. Agents mapped out the structure of his organization and sifted through a global labyrinth of transactions.

“It made us realize how big Li really was,” Ciesliga said. “He was definitely one of the first. We were talking to 40 different agents around the country and around the world, and for them it was a new thing what he was doing.”


The Fall of the Boss

The investigation gathered momentum as the DEA launched Project Sleeping Giant, a campaign against China-connected drug activity.

The agents dug through phone data and old cases to find Li’s ties to the 14K triad. That all-important discovery helped explain his “sprawling spider web of connections” in Asia and the Americas, Ciesliga said.

The 14K connection also pointed at the Chinese power structure. The triad’s former boss in Macao, Wan Kuok Koi, allegedly mixes crime, business and politics to advance China’s interests overseas, according to public allegations by the U.S. government. He is an influential member of the Chinese People’s Political Consultative Conference of the Communist Party, according to Treasury Department anti-corruption sanctions filed in 2020. A former senior State Department official, David Asher, described him as “an ambassador of organized crime.”

Wan and a Chinese Foreign Ministry spokesperson have denied the U.S. allegations.

The alleged state-underworld alliance surfaces elsewhere. In Hong Kong and Taiwan, triads attack political rivals of Beijing. Canadian national security chiefs have warned for years about an alliance of Chinese spies, triads and oligarchs. U.S. gangsters assist the Communist Party’s overseas intelligence and influence arm, the United Front, according to national security experts. The party “uses organized crime-linked money laundering networks to get money to United Front actors and to help them fund their activities,” said Matthew Pottinger, who served as U.S. deputy national security adviser from 2019 to 2021. In return, triads gain “a sense of political security,” he said.

In the Li case, agents learned that clients for his money-moving services included powerful figures in the party, the Chinese government and the diaspora, according to Ciesliga and other former law enforcement officials and people familiar with the case. But it was hard to gather evidence because, as prosecutors said in a court filing, “United States law enforcement rarely, if ever, obtains assistance from Chinese officials in criminal investigations.”

Chinese authorities permit criminals like Li to operate because dark money benefits the elite, strengthens China’s economy and weakens the West, U.S. national security officials say.

“There is a strategy; it’s not individuals acting on their own,” Tobon, the Honolulu HSI chief, said. “The amount of money coming out of China via the underground banking system is so significant that it would be virtually impossible for a government that has as much control of their people as the government of China to not be aware of how it's happening.”

Some critics of Beijing say that analysis applies to another threat: fentanyl. China is the top producer of the lethal drug that has killed tens of thousands of Americans. Although pressure by the Trump administration caused Beijing to reduce the direct flow of the drug to the U.S. in 2019, China’s pharmaceutical sector still sells fentanyl precursors and analogues that reach Mexico, where cartels produce opioids — and work with Chinese money launderers.

In late 2019, Li finally fell. Making him think he would meet an associate, the DEA lured him to Merida, Mexico. Mexican federal police captured him and delivered him to DEA agents at the Houston airport, court documents say. He spent four and a half hours answering questions in English, admitting to “financial transactions involving ‘bad money,’” prosecution documents say.

Prosecutors charged him with leading a conspiracy that washed at least $30 million, a number backed by direct evidence. The full amount was likely in the hundreds of millions, according to law enforcement documents and interviews.


Xizhi Li Credit:Alexandria (Virginia) Sheriff’s Office

Li pleaded guilty and received a 15-year sentence, according to court records. Chen and half a dozen others also pleaded guilty and went to prison. Colombia extradited Flores, who pleaded guilty and got 16 years.

Li’s high-powered connections put him at risk. His old friend Liu feared for his safety, Simms said, because Li “was involved in Chinese organized crime, in Mexican money laundering, in activity in China that goes to higher levels of the power structure.”

And in this case, the fall of the boss was not the end of the story.

Sebastian Rotella Sebastian Rotella is a reporter at ProPublica. An award-winning foreign correspondent and investigative reporter, Sebastian's coverage includes terrorism, intelligence and organized crime.

Kirsten Berg
Kirsten Berg is a research reporter with ProPublica.

This message has been edited. Last edited by: Modern Day Savage,

IIRC genetically targeted weapons research goes back to at least 1980's and the South African "Coast" project. I think Cambridge University warned of the possibility in 1999 and there are several misc. articles over the years that point to at least some concerns.

I can see the the Aircraft parked at air force bases I have lived at or near always parked in the same places. Pretty sure with a couple of drones and some friends I could take out a large portion of the air force.

In WWII we parked all of our ships in a single base in Pearl Harbor. Considering what the Ukrainians are doing with commercial drones I'm kind of worried about our Airforce. I hope they have plans to deal with these drones. I'm not a believer in big government and that is why I worry since government fails so damn much.

What gw3971 said! when I was in Security Police, it amazed me that the P.O.L. yard was so exposed. I thought everything should have been underground.