Tether Scandal: Chinese Authorities Uncover Alleged $2B USDT Money Laundering Operation

Chinese law enforcement agencies have announced a breakthrough in their fight against illegal financial activities. They have dismantled a large underground banking gang allegedly involved in facilitating illegal transactions using Tether’s USDT stablecoin. 

The operation spans multiple provinces and is believed to have enabled over $2 billion worth of illicit USDT transactions. 

193 Suspects Arrested In Tether-Linked Banking Scandal

According to local media reports, the Chengdu Municipal Public Security Bureau uncovered a significant underground banking case involving a staggering 13.8 billion yuan ($1.9 billion). 

The operation was spread across 26 provinces, municipalities, and autonomous regions. 193 suspects have been arrested nationwide, with public security agencies in each jurisdiction filing 58 cases. Authorities have also frozen 149 million yuan in funds associated with the operation.

The investigation was initiated in November 2022 when the Longquanyi District Branch identified suspicious fund settlements through underground banks, indicating potential engagement in illegal foreign exchange activities. 

The Chengdu Municipal Public Security Bureau reportedly formed a task force of various departments, including economic investigation, cyber security, legal affairs, and technical investigation. 

On June 1, 2023, the task force coordinated arrest operations in Shanghai, Changsha, Nanjing, Shenzhen, Fuzhou, Jinhua, and other locations under the command of the Ministry of Public Security and the Public Security Department.

As a result, 25 criminal suspects, including Lin, Weng, and Chen, were apprehended, and significant evidence, such as bank cards and payment instruments, was seized.

$1.9 Billion Illegal Scheme Unveiled

The investigation revealed that the criminal gang, led by Lin, Weng, Chen, and others, primarily operated within the import and export business sector. Authorities further claim that they allegedly exploited USDT as a medium to provide illegal services to customers seeking to transfer funds abroad. 

Their activities primarily involved illegal foreign exchange, payment, and settlement businesses, which reportedly facilitated the smuggling of drugs and cosmetics, overseas asset purchases, and fraudulent tax refund schemes

According to the report, Tether’s use of stablecoin allegedly allowed it to evade national foreign exchange supervision, posing “substantial risks” to foreign exchange security and financial management.

By reportedly utilizing USDT and collaborating with other companies for fund settlements, the gang engaged in various criminal activities, including financial fraud, job-related crimes, drug management obstruction, smuggling of prohibited goods, credit card fraud, and export tax refund fraud.

Crack Down On Criminal Operations

Tether has swiftly cracked down on criminal operations utilizing its digital currency in response to allegations of its involvement in illicit activities. Paolo Ardoino, the firm’s CEO, has consistently emphasized the company’s commitment to combating illicit activity and has called Tether “the dumbest choice for doing illicit activity.” 

Recently, Tether also took a decisive step to combat illicit activity by freezing approximately $5.2 million USDT. The action was taken in response to crypto tracking and compliance platform MistTrack findings. 

The platform identified 12 Ethereum addresses associated with phishing operations, which threatened users and the integrity of the cryptocurrency ecosystem. 

Tether has also implemented new security measures aimed at preventing illicit financial activities. In collaboration with Chainalysis, a crypto tracking and compliance platform, the stablecoin issuer has developed a tool specifically designed to monitor secondary markets. This enables Tether to detect and address any suspicious or unauthorized transactions promptly.

Featured image from Shutterstock, chart from TradingView.com