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Tether may not like it, but the prevailing narrative of its stablecoin fueling the criminal, often violent acts of Southeast Asian gangs isn’t going away anytime soon.
On July 10, blockchain analysts Elliptic issued a detailed report on Huione Guarantee, a Cambodia-based Chinese-language digital marketplace that has become a hub for groups involved in ‘pig butchering’ scams. To no one’s surprise, Tether’s USDT stablecoin is the financial grease that oils this criminal machine.
Huione Guarantee effectively serves as a trusted financial middleman for scammers, ‘guaranteeing’ deposits and escrow services for merchants and customers. Launched in 2021, the site originally offered a variety of legitimate goods and services, but Elliptic claims to have “overwhelming evidence that [Huione’s] predominant role is to act as an illicit marketplace.”
Thousands of merchants operate on the site via individual messaging app channels. Huione Guarantee takes a decidedly laissez-faire attitude toward its merchants, saying it “does not participate in nor understand the specific business of customers.” It expresses similarly willful ignorance regarding “the origin of funds or goods” proffered by its merchants.
The dominant product/service offered is laundering money obtained via scams, but other merchants offer software and website development for various scams, as well as artificial intelligence (AI) ‘face changing’ tools that allow romance scammers to alter their appearance when communicating with their prospective victims.
Even more sinister products available on Huione Guarantee add credence to reports that the majority of individuals working in so-called ‘scam compounds’ in ‘special economic zones’ of Cambodia, Laos, and Myanmar are victims of human trafficking.
Huione Guarantee offers a wide variety of tools for keeping one’s captive drones in line, including electric batons and ankle bracelets that zap the worker should they stray outside a designated area. That basically describes a dog’s shock collar, so it’s little surprise that the site’s preferred term for these enslaved workers is ‘dogs,’ while those that oversee their activity/detention are called ‘dog pushers.’
Despite its obvious criminal ties, Huione Guarantee appears to operate with impunity. That may be because it’s an appendage of the Huione Group, a conglomerate that counts among its interests a legit payments business called Huione Pay (the website of which reportedly scrubbed a reference to Huione Guarantee following the publication of Elliptic’s report).
An offshoot of Huione Pay, Huione International Payments, is one of Huione Guarantee’s merchants offering to launder the proceeds of scams. A Huione Pay director—previously suspected of heroin trafficking and money laundering—is the cousin of Cambodia’s current prime minister. So, odds are against this crime-fueling marketplace facing the authorities’ wrath.
Tether not impressed when someone else gets the notoriety
While Huione Guarantee accepts legitimate payment apps and bank transfers, “payments are advertised as being accepted primarily in the USDT stablecoin.” Elliptic claims that digital wallets linked with Huione Guarantee and its merchants have received “over $11 billion” since the site’s launch three years ago. However, Elliptic cautions that the real figure is likely much higher due to the firm’s inability to penetrate channels run by certain ‘VIPs’ on the Huione Guarantee.
Whatever the real dollar figure, it’s growing quickly. Huione Guarantee and its merchants haven’t received below $1 billion in USDT in any quarter since Q1 2023. These same wallets received more than $1.5 billion every quarter since Q3 2023 and have brushed close to the $2 billion mark on several occasions.
While not all of these sums can be definitively linked to crime, Elliptic says, “The nature of the products and services advertised by these merchants and their open willingness to facilitate scams, provide very strong indications that the vast majority of these payments relate to illicit activity.”
Tether was previously flagged as being responsible for 84% of ‘pig butchering’ financial transactions, and no less an authority than the United Nations cited USDT’s essential role in fueling money laundering, online gambling, and cyber fraud by Southeast Asian criminal gangs.
A ChainArgos report from earlier this year called the laundering of scam proceeds “crypto’s killer app” and specified that “the main token used in such scamming, by far, is USDT.” Last year, the Australian Financial Review linked USDT with human slavery in Cambodia-based ‘scam compounds’ and said it was “hard to see how this slave complex could exist without cryptocurrency.”
Tether CEO Paolo Ardoino has yet to publicly comment on the report. However, an unidentified spokesperson threw shade at Elliptic by denigrating blockchain analysts who “observe wrongdoing but choose to record it for social media engagement and notoriety—rather than prioritize intervention.”
Where there’s crime, there’s Tether
Tether clearly doesn’t enjoy the fact that the general public associates the company’s chief product with slaves being shocked by electric batons. But let’s be fair: the criminal applications of USDT are by no means limited to cyber fraud, as its usefulness to Southeast Asian kidnappers/murderers is also making headlines.
On July 3, a three-year-old boy was kidnapped from a Hong Kong shopping mall, after which his parents received a ransom demand for just over HKD 5 million ($660,000) that was to be paid in USDT. Fortunately, the public nature of the abduction meant there were numerous camera angles of the kidnappers, who were arrested the following day, and the boy was returned to his family safe and sound.
In a sadder tale, Chinese media recently reported on last month’s deaths of two Chinese employees of a medical company who traveled to the Philippines on June 20. Family members of one of the victims were contacted by a gang who claimed their son had lost money gambling in the Philippines, and the family needed to send RMB 15 million ($2 million) to secure his release.
The family instead contacted Chinese and Philippine authorities, but the other victim’s family reportedly paid a ransom of RMB 3 million after they, too, were contacted with demands for cash. As per the kidnappers’ instructions, the renminbi was first converted to USDT and then sent to a designated wallet. Sadly, the bodies of both victims were found by Philippine authorities on June 24.
Tether’s inability to establish relationships with reputable banks means USDT will soon find itself on the outs in Europe due to the new Markets in Crypto Assets (MiCA) regulations. And it won’t be long before U.S. regulators/legislators force U.S.-based exchanges to ditch USDT in favor of USDC, the stablecoin issued by U.S. rival Circle.
That will leave Tether even more reliant on regions such as Southeast Asia, but the growing realization in these countries that USDT is helping to victimize residents through scams, kidnappings, and murders won’t win the company any favors. Eventually, the public cries for justice will become too loud for even the most corrupt governments to ignore. We suspect this will be one ‘intervention’ Tether won’t appreciate.
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