The Chinese police forces recently made headlines after busting a large underground banking operation that utilized Tether (USDT) to transfer up to 13.8 billion yuan ($1.9 billion). The Public Security Bureau of Chengdu Municipal arrested 193 suspects involved in the case and froze 149 million yuan ($20.6 million) in connection with the operation. The investigation, which started in 2022, uncovered a criminal gang operating an underground banking scheme using USDT to facilitate foreign exchange transactions.
The criminal gang, originating from the Chinese import and export business, provided illegal services such as foreign exchange payment and settlement to cosmetics and drug smugglers, as well as locals looking to acquire foreign assets. In addition to transferring funds abroad, the gang collaborated with other companies to fraudulently obtain tax refunds. The use of USDT allowed the gang to evade national foreign exchange supervision, posing a significant threat to the country’s financial security.
The Longquanyi District Branch of the Chengdu Municipal Public Security Bureau first uncovered the illegal operation in November 2022 during the handling of a drug case involving fund settlement through underground banks. Following this discovery, the Ministry of Public Security launched a task force that raided six municipalities, leading to the arrest of 25 suspects and the seizure of various payment instruments, including bank cards and U-shields. Subsequent raids in August 2023 resulted in the arrest of 168 individuals across 26 provinces.
The Ministry of Public Security’s crackdown on underground banking crimes continued with a nationwide campaign targeting illicit financial activities. The recent raid in Chengdu, which marked the second such operation this month, is part of the government’s efforts to combat financial fraud and money laundering. Additionally, a separate underground bank involving 2.14 billion yuan ($296 million) in cryptocurrencies was uncovered in Panshi City, Jilin Province, leading to the arrest of six individuals wanted for crimes in South Korea.
The Chinese authorities are actively working to dismantle underground banking operations that pose a threat to the country’s financial security. By leveraging stablecoins like Tether for illegal activities, criminal organizations bypass regulations and evade scrutiny, highlighting the challenges faced by law enforcement in combating financial crimes in the digital age.
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