The Chinese police forces recently made a major breakthrough by uncovering a large underground banking operation that was utilizing the popular stablecoin Tether (USDT) to transfer a significant amount of money. The operation, which involved up to 13.8 billion yuan ($1.9 billion), was exposed by the Public Security Bureau of Chengdu Municipal. This crackdown resulted in the arrest of 193 suspects associated with the case and the freezing of 149 million yuan ($20.6 million) following a raid on the operation’s premises.
Investigations carried out by the police revealed that the underground banking operation was orchestrated by a criminal gang with roots in the Chinese import and export business sector. The gang used USDT to facilitate foreign exchange payment and settlement activities, offering illicit services to individuals involved in cosmetics and drug smuggling, as well as locals seeking to acquire foreign assets. Apart from using the stablecoin for transferring funds overseas, the gang collaborated with other entities to unlawfully obtain tax refunds, thereby engaging in fraudulent activities.
The usage of USDT by the criminal gang not only enabled them to provide illegal foreign exchange settlement services but also allowed them to evade national foreign exchange supervision measures, posing a significant threat to China’s financial security. In addition to their involvement in illegal financial activities, the gang’s operations were also linked to various other crimes such as job-related offenses, contraband smuggling, and financial fraud like credit card mismanagement and export tax refund scams.
The crackdown on underground banking operations involving cryptocurrencies extended beyond Chengdu, with the Ministry of Public Security launching a nationwide campaign against such criminal activities. Multiple raids were conducted across different municipalities, including Shanghai, Changsha, Nanjing, Shenzhen, Fuzhou, and Jinhua, resulting in the arrest of suspects and the seizure of various payment instruments like bank cards and U-shields. This concerted effort by law enforcement agencies aimed to curb the proliferation of underground banks and safeguard the country’s financial integrity.
The recent raid in Chengdu was just one of several operations carried out by the authorities to dismantle illegal underground banking networks. Subsequent crackdowns in other provinces, such as the one in Panshi City of the Jilin Province, involving cryptocurrencies worth billions of yuan and multiple arrests, demonstrate the government’s proactive stance against financial crimes. The continuous efforts to combat underground banking activities underscore the importance of regulatory oversight and enforcement to maintain the stability and security of China’s financial system.
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