The suspects allegedly used USDT to run a foreign exchange payment and settlement business, providing illegal services to cosmetics and drug smugglers.
The Chinese police forces have burst a large underground banking operation using the popular stablecoin Tether (USDT) to facilitate transfers of up to 13.8 billion yuan ($1.9 billion).
According to a report from local media house Weixin, the Public Security Bureau of Chengdu Municipal arrested 193 suspects linked to the case and froze 149 million yuan ($20.6 million) after raiding the operation’s location.
A $1.9B Underground Banking Operation
Investigations conducted by the police force since 2021 revealed that the underground banking operation was headed by a criminal gang, which originated from the Chinese import and export business. They used USDT to run a foreign exchange payment and settlement business, providing illegal services to cosmetics and drug smugglers and locals who acquired foreign assets.
In addition to using the stablecoin to transfer funds abroad, the gang joined forces with other companies to fraudulently obtain tax refunds. The police force also found that USDT was used to evade national foreign exchange supervision, posing a threat to the country’s financial security.
Besides providing illegal foreign exchange settlement channels, the gang’s operation is also linked to job-related crimes, smuggling of contraband goods, and financial fraud like the obstruction of credit card management and defrauding export tax refunds.
Combatting Chinese Underground Banks
The Longquanyi District Branch of the Chengdu Municipal Public Security Bureau first discovered the operation in November 2022 when it handled a drug case, which involved fund settlement through underground banks.
In June 2023, the Ministry of Public Security created a task force that raided six municipalities, including Shanghai, Changsha, Nanjing, Shenzhen, Fuzhou, and Jinhua, in search of the underground banks. The raid led to the arrest of 25 suspects and the seizure of many payment instruments, including bank cards and U-shields.
Another raid was conducted in August 2023 where 168 individuals were arrested in 26 provinces. Subsequently, the Ministry of Public Security began a nationwide campaign against underground bank crimes.
Meanwhile, the raid in Chengdu is the second this month. Earlier this week, the police force in Panshi City of the Jilin Province cracked another underground bank involving 2.14 billion yuan ($296 million) in cryptocurrencies and arrested six individuals, including suspects wanted for crimes in South Korea.