Chinese Police Bust Underground Banking Operation Using Tether

According to CryptoPotato, Chinese law enforcement has busted a major underground banking operation that used the well-known stablecoin Tether (USDT) to facilitate transfers worth a total of 13.8 billion yuan ($1.9 billion). The Chengdu Municipal Public Security Bureau arrested 193 people connected to the case and froze 149 million yuan ($20.6 million) after raiding the location of the operation.

Police investigations since 2021 have revealed that the underground banking operation was run by a criminal gang with roots in Chinese import and export businesses. The gang used USDT to operate a foreign exchange payment and payment business that provided illegal services to cosmetics and drug traffickers and locals purchasing foreign assets. The gang also collaborated with other companies to fraudulently obtain tax refunds. Police discovered that USDT was being used to circumvent national exchange controls and posed a risk to the country's financial security.

The gang's operation is also linked to business-related crimes, smuggling of illegal goods and financial frauds such as interfering with credit card management and fraud in export tax refunds. The Longquanyi District Branch of the Chengdu Municipal Public Security Bureau first detected the operation in November 2022 while handling a drug case involving the payment of funds through underground banks.

In June 2023, the Ministry of Public Security formed a task force that raided six municipalities, including Shanghai, Changsha, Nanjing, Shenzhen, Fuzhou and Jinhua, to search for underground banks. The raid resulted in the arrest of 25 suspects and the seizure of several payment instruments, including bank cards and U-shields. A raid was carried out in August 2023 and 168 people were arrested in 26 provinces.