Chinese Authorities Expose a $1.9 Billion Underground Bank Using USDT for Illicit Transactions

Chinese Authorities Expose a $1.9 Billion Underground Bank Using USDT for Illicit Transactions
Photo by Yiran Ding / Unsplash

In a major operation spanning 26 provinces, Chinese law enforcement has uncovered an underground banking network that engaged in illegal financial activities using Tether (USDT), a popular stablecoin. This operation involved the seizure of approximately 13.8 billion yuan ($1.9 billion) and the detention of 193 suspects, indicating a widespread crackdown on financial crimes involving digital currencies.

The discovery was first reported by Red Star News, highlighting how the underground bank exploited stablecoins like USDT to bypass national currency regulations. This illicit banking operation allowed for unauthorized currency exchanges, posing a significant threat to China's financial and currency stability.

The investigation began in November 2022 when authorities in Chengdu Municipal Public Security Bureau identified an individual transferring large sums of money through this underground network, along with other illegal activities. This led to the formation of a task force comprising members from economic crimes, cybersecurity, and other police divisions.

On June 1, 2023, the task force initiated investigative actions in six regions, including Shanghai and Fuzhou. They discovered a criminal group that was using USDT to evade national currency oversight, which they described as "a massive hidden threat to national financial security."

Throughout the investigation, the authorities arrested 25 suspects and confiscated bank cards and other payment instruments linked to the crime. This illegal operation was connected to a series of other criminal activities, including smuggling and financial fraud.

In August 2023, the operation gained further momentum when the task force used criminal evidence gathered from the case to expand their investigations, leading to the arrest of an additional 168 suspects involved in various criminal activities. This marked one of the largest actions against underground banking operations in history.

In a related incident from August 2023, a Chinese citizen was sentenced to nine months in prison for purchasing $13,000 worth of USDT, further underscoring the stringent measures being implemented against unauthorized digital currency transactions.

This extensive operation reflects China's increasing efforts to regulate the flow of digital currencies and curb financial crimes that could undermine the economic and financial security of the nation.