Operation Destabilize: How criminals used Tether to launder cash

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Drugs, ransomware, sanctions evasion, and espionage—these are just some of the crimes a global investigation into financial crimes and money laundering networks has uncovered.

Operation Destabilize, led by the United Kingdom’s National Crime Agency (NCA), targeted large-scale money-laundering networks focusing on Russian-linked entities.

The operation uncovered two Russian networks, the Smart Group and the TGR Group, involved in laundering cash for cybercriminals, drug dealers, and sanctioned oligarchs.

Operating across thirty countries from the U.K. to the Middle East and South America, they used Tether and other digital currencies to launder for criminal gangs like the Kinahan cartel, to help sanctioned Russian oligarchs bypass restrictions, and even to aid the Russian state with espionage operations.

So far, 84 individuals, including Smart Group mastermind Ekaterina Zhdanova, have been arrested, and £20 million ($24.2 million) in digital currencies has been seized.

Tether – always in the room, but never guilty

While Tether has reasserted its commitment to working with law enforcement agencies and monitoring to prevent illegal activity, this isn’t the first time the offshore stablecoin issuer has found itself at the heart of a large-scale criminal investigation.

In its decade-long history, Tether has been linked to many different crimes spanning the globe. After researchers discovered it was used to inflate the price of BTC in 2017, it was linked to Crypto Capital Corp, another firm linked to money laundering for drug cartels. The United States Department of Justice (DOJ) has mentioned it in relation to terrorist financing, and other authorities have linked it to cartel operations in Mexico and sanctions evasion in North Korea and elsewhere.

While Tether, perhaps rightly, claims it cannot control who uses its network and what they use it for, the company doesn’t have a squeaky-clean past in and of itself. Having been banned in New York State for making misleading claims about its reserves, Tether has repeatedly refused to submit to a proper audit, and it has paid a litany of fines to the New York Attorney General (NYAG), the Commodity Futures Trading Commission (CFTC), and other U.S. regulators for numerous regulatory infractions.

Tether always seems to be in the room when crime happens but is never guilty. At least, that’s what its bosses maintain.

Troubled in the EU, can Tether survive US stablecoin regulations?

With such a questionable past, it’s not surprising that Tether recently discontinued its EUR₮ stablecoin in Europe. The European Union’s Markets in Crypto-Assets (MiCA) regulations place strict requirements and responsibilities on stablecoin issuers, including obtaining e-money licenses and maintaining transparent reserves.

Citing a lack of regulatory support, Tether pulled EUR₮ in November 2024, giving holders one year to redeem their holdings. Whether its USDT stablecoin will survive in the EU remains to be seen, but Coinbase Europe (NASDAQ: COIN) and multiple other exchanges have already delisted it.

With the incoming Trump administration expected to provide regulatory clarity in the U.S., it’s unclear how potential stablecoin regulations might impact Tether. While it is now a large holder of U.S. government bonds, a company that has been banned in New York, linked to the activities of widely despised Mexican drug cartels, and whose key product has been used by Russia and North Korea to evade sanctions is unlikely to be popular with President Trump or the people he appoints to run U.S. agencies.

Should Tether be delisted from U.S. exchanges, it would likely cause widespread panic in the digital currency markets. At press time, USDT’s 24-hour volume was $78 billion, making it a key component in how digital currency markets function. A widespread delisting by U.S. exchanges would almost certainly send the prices of digital currencies sharply lower.

Given Tether’s links to Operation Destablize and many other criminal networks, its future is uncertain. Should it survive and work its way into the heart of the traditional financial system by purchasing yet more U.S. bonds and propping up the price of BTC as it becomes intertwined in pension funds, exchange-traded funds (ETFs), and other conventional financial instruments that should be of grave concern to everyone. Such an outcome would be utterly unthinkable in any rational world.

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