Are stablecoins a tool for fraud?
According to a joint investigation by the FBI and the Royal Thai Police, Tether ($USDT) has become an ideal tool for fraud scams due to its relative stability, speed, convertibility and international transferability. A recent U.S. Department of Justice civil forfeiture action highlights why money launderers often choose $USDT. These characteristics make Tether one of the main means for fraudsters to transfer funds and launder money.
How the scam works
The most common of these scams is the so-called "Pig Butchering", which is a scam based on establishing false relationships. The scammer first establishes contact with the victim through social media or dating apps, and then uses various reasons to convince the victim to deposit cryptocurrency into an overseas exchange or wallet and guarantee the safety of the funds, luring the victim to further invest funds. Victims are often told that the funds are used to pay for expenses such as travel or medical expenses, and sometimes even receive false account statements or website login information showing that the funds have increased in value.
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Eventually, these funds are transferred into the control of scammers and turned into stablecoins such as Tether. These stablecoins maintain the stability of the US dollar most of the time, making it easier for scammers to manage and transfer stolen money. In 2022 alone, proceeds from hog farm scams exceeded $2 billion. It was even explored in depth by journalist Zeke Faux in his new book Number Go Up, revealing the horrors of this scam.
Image source: Amazon Zeke Faux’s book “Number Go Up”
According to blockchain analytics firm Elliptic, illicit wallets have received more than $11 billion in the past three years.
Using exchanges to launder money
These scammers also use hybrid technologies on the blockchain and non-blockchain transfer operations to launder money in an attempt to conceal the final destination of the funds. A new court filing in District Court for the District of Columbia reveals an example of one such money laundering operation. According to U.S. prosecutors, two accounts on Binance illegally received 2,546,415 $USDT, and the funds went through a series of money laundering steps in an attempt to be disconnected from the original fraudulent funds.
U.S. prosecutors demonstrated how these $USDT were moved through multiple layers within the Binance ecosystem. These transfer operations were not recorded on the public blockchain, making it difficult for investigators to trace the flow of funds. These money laundering operations hope to hide the source and final destination of the funds by mixing transfers on and off the blockchain.
Source: Protos Confiscation Action Fund Flow Chart
Collaborative investigation reveals the truth
Although scammers used sophisticated technology to try to conceal the flow of funds, forensic researchers from the FBI and Royal Thai Police successfully deconstructed these $USDT scams, traced victims’ funds and submitted court orders to freeze and confiscate the proceeds of these crimes. The civil forfeiture action does not accuse Tether or Binance of wrongdoing. Binance said they were proud to support the FBI’s San Diego Division’s investigative and analytical efforts and help uncover leads and handle the $2.5 million seizure.
“Through collaboration and intelligence sharing, our investigative and case teams helped uncover leads and process a $2.5 million forfeiture for victims,” Binance said in a statement. The operation demonstrated the power of cross-border cooperation in the fight against Importance of Cryptocurrency Crime.
The amount involved is nearly 200 million! Binance joins hands with Taiwanese prosecutors to crack down on “fake personal currency dealer” money laundering case
Challenges and Prospects of Stablecoins
This case demonstrates the double-edged sword role of stablecoins in financial crimes. While stablecoins like Tether offer convenience in payments and fund transfers, their anonymity and decentralized nature also make them ideal tools for money laundering. This reminds regulatory agencies and transactions to strengthen supervisory measures to prevent the occurrence of such criminal activities.
In the future, as the cryptocurrency market expands its functions, regulatory agencies, exchanges, and users will need to work together to ensure the legal use of digital assets and prevent them from being exploited by criminals. This case is not only a powerful crackdown on money laundering activities, but also a warning to all users who use and trade cryptocurrency, reminding everyone to stay vigilant and avoid falling into fraud traps.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.