Chinese millionaire sues himself through an offshore shell company to beat currency export controls

China's millionaires, having looted their country, are anxious to get their money out of reach of the Politburo, to guard against confiscation should the political tides turn. Only one problem: the government will only let Chinese nationals move $50K/year out of the country.

The majority of China's new super-rich are prepped to leave the country, but getting their cash out is a serious problem. Much of the volatility in Bitcoin can be ascribed to Chinese elites using the cryptocurrency to smuggle cash out of the PRC. With the Chinese Yuan tanking, the race is on to convert Chinese wealth to other currencies and get out while the getting is good.

But there's a better way: for a small sum, you can just set up an offshore shell company, direct it to sue a Chinese company you own, throw the lawsuit, and then, oh well, I guess there's nothing for it but to send a bunch of cash to your shell company, exempted from export controls, in the form of court-ordered damages.

Mr. Harris told China Real Time that the company, a privately-held Chinese manufacturer, wanted to pursue such a fake arbitration, rather than fake a simple legal settlement for the same amount of money, because it was concerned about convincing government regulators who have been closely scrutinizing offshore remittances.

"They wanted it to look really official," he said in a phone interview. "Arbitration also moves quickly, so they could conceivably do it within three months."

Mr. Harris said he got the call in the last two weeks, and it was the first and only of its kind he's so far received. He said he altered the nationality of the adviser recounted in his blog post – the adviser was a Westerner, but not Australian – to shield the identities of those involved.

It became clear to Mr. Harris in his conversation with the Western adviser to the Chinese company that there wasn't even a real counter-party in the U.S., where the Chinese company wanted to move its funds. "We would have helped to form this company that would have sued this Chinese company," he told China Real Time.

China Capital Flight 2.0: Lose A Lawsuit On Purpose
[Wall Street Journal]

(via Neatorama)

(Image: A PLZ-89 self-propelled howitzer passes the Shin Kong Place Luxury shopping centre during a training exercise, Beijing.
, Dan, CC-BY