The Chinese police recently uncovered a major underground banking operation that utilized the popular stablecoin Tether (USDT) for transferring funds amounting to 13.8 billion yuan ($1.9 billion). The operation was led by a criminal gang involved in the import and export business in China. The gang used USDT to run a foreign exchange payment and settlement business, providing illegal services to smugglers of cosmetics and drugs, as well as locals looking to acquire foreign assets.
The Public Security Bureau of Chengdu Municipal arrested 193 suspects connected to the underground banking operation and froze 149 million yuan ($20.6 million) following a raid. The police force discovered that the gang not only used USDT for fund transfers but also engaged in fraudulent activities to obtain tax refunds. This operation posed a threat to the country’s financial security by evading foreign exchange supervision.
Nationwide Crackdown
In response to the discovery, the Ministry of Public Security launched a nationwide campaign against underground bank crimes. The crackdown involved multiple raids in cities like Shanghai, Changsha, Nanjing, Shenzhen, Fuzhou, and Jinhua, leading to the arrest of several suspects and the seizure of various payment instruments, including bank cards and U-shields. More arrests were made in different provinces, totaling 168 individuals apprehended in connection with the illegal operation.
International Connection
The police force’s efforts also extended beyond Chinese borders, as they apprehended suspects wanted for crimes in South Korea in connection with a separate underground banking operation in Panshi City, Jilin Province. This operation involved cryptocurrencies amounting to 2.14 billion yuan ($296 million), further highlighting the cross-border implications of such illegal activities.
The use of stablecoins like Tether for illegal activities raises concerns about the vulnerability of the financial system to exploitation by criminal elements. The evasion of foreign exchange supervision and fraudulent tactics used by the gangs not only undermine the integrity of financial transactions but also pose a significant risk to national security.
Overall, the dismantling of this underground banking operation underscores the importance of robust regulatory measures and law enforcement efforts to combat illicit financial activities using digital assets like USDT. It serves as a reminder of the ongoing challenges posed by financial crime in an increasingly digital and interconnected world.