Chinese police expose $54M money laundering scheme involving USDT

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Chinese law enforcement agents have confirmed the arrest of 21 individuals suspected of operating a money laundering ring using the USDT stablecoin.

Investigators say the scheme has been in operation since 2021 and laundered over $54 million, local news outlet CCTV reported. Authorities say the scheme involved victims purchasing USDT at a discount on over-the-counter (OTC) platforms and selling them at a premium to cybercriminals.

The three-year scheme involved the use of “point running,” a money laundering method of using personal accounts to collect digital currency for others. The suspects relied on USDT for its convenience, advanced privacy, and anonymity features to be the digital asset of choice for the money laundering scheme, investigators said.

Authorities got the first whiff of financial irregularities on April 1 after discovering that a resident of Zhao Mouyue had a suspicious inflow of funds into his bank accounts. The local police launched an investigation into the flow of funds, unraveling a sophisticated money laundering scheme spanning multiple cities.

Investigators disclosed the scheme spanned six cities in four different provinces, including Jiangxi and Henan. The police formed three separate teams to carry out a simultaneous arrest on the known locations of the syndicate.

In the end, a total of 21 suspects were arrested during the raid, with authorities confirmed seizing 40 mobile phones and nearly $30,000. CCTV notes that upon preliminary questions in custody, all 21 arrested individuals have confessed to their involvement in “facilitating the conversion of Chinese yuan to USDT.”

The use of USDT by the money laundering syndicate could complicate the defense of the suspects, given the illegal status of digital currencies in China. Since 2021, China has imposed a blanket ban on digital currencies, imposing stiff criminal penalties on violations of the ban.

The impact of the ban was immediate as digital asset miners fled mainland China to friendlier jurisdictions, a move that shifted the balance of BTC hash rates.

However, multiple reports have suggested that Chinese residents are bypassing the blanket ban through the use of virtual private networks (VPNs) and decentralized finance platforms. Miners are reportedly still engaged in mining digital assets, masking their operations through the use of mining pools.

Digital currency crime on a decline

Digital currency crime around the world has recorded a steep decline in activity, according to a mid-year Chainalysis report. According to the report, low transaction volumes and low prices have contributed to the decline in digital currency crime.

Other factors include the ratification of the Financial Action Task Force’s (FATF) recommendations on digital currency regulations and increasing public sensitization by government agencies.

While digital currency scams have seen a marked decline, Chainalysis warns investors to brace for a spike in the number of ransomware attacks on digital wallets.

Watch: Lise Li: Why Bitcoin SV will succeed in China