Police arrested and charged two alleged syndicate members, 36-year-old man Xin Hu and 37-year-old woman Sigia Wang, this week.
The damaged $1 and $2 coins were brought into Australia concealed as belt buckles in a shipment picked up by Border Force agents in June, NSW Police said.
Police said the coins were laundered at smart ATMs across Sydney, with the money deposited into several bank accounts and sent offshore.
The damaged coins were thought to have been taken out of circulation and no longer considered legal tender.
After further consignments were detected this week, police executed search warrants at businesses in the Sydney city centre and a home in Strathfield on Wednesday.
Hu and Wang were arrested and charged with recklessly dealing with the proceeds of crime.
Organised Crime Squad commander Peter Faux said the group attempted to avoid detection by using several different ATMs and depositing varying amounts of cash each day.
"The alleged actions of this group demonstrate the elaborate ways offshore syndicates are attempting to infiltrate our country and extort our financial system," he said.
"These groups all chase one thing – money.
"They want the power and control which comes with it and do not care who they defraud to get there."
Hu and Wang were refused bail and are due to appear at Burwood and Downing Centre Local Courts respectively on Thursday.
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