Chinese Police Raid $1.9 Million USDT Illegal Banking Operation: Report

Chinese police forces have busted a major clandestine banking operation using the popular stablecoin Tether (USDT) to facilitate transfers of up to 13.8 billion yuan ($1.9 billion).

According to a report by local media house Weixin, the Chengdu Municipal Public Security Bureau arrested 193 suspects in connection with the case and froze 149 million yuan ($20.6 million) after raiding the location of the operation.

A $1.9 million underground banking operation

Investigations carried out by the police since 2021 revealed that the clandestine banking operation was headed by a criminal gang, originating in the Chinese import and export business. They used USDT to run a currency settlement and payment business, providing illegal services to cosmetic and drug smugglers and locals who acquired foreign assets.

In addition to using the stablecoin to transfer funds overseas, the gang teamed up with other companies to fraudulently obtain tax refunds. The police force also found that the USDT was being used to evade national currency supervision, posing a threat to the country’s financial security.

In addition to providing illegal currency settlement channels, the gang’s operation is also linked to employment related crimes, smuggling of contraband goods and financial fraud such as obstruction of credit card processing and defrauding export tax refunds.

Fighting China’s underground banks

The Chengdu Municipal Public Security Bureau’s Longquanyi District branch first discovered the operation in November 2022 when it handled a drug case, involving the liquidation of funds through underground banks.

In June 2023, the Ministry of Public Security created a task force that raided six municipalities, including Shanghai, Changsha, Nanjing, Shenzhen, Fuzhou, and Jinhua, in search of underground banks. The raid led to the arrest of 25 suspects and the seizure of many payment instruments, including bank cards and U-shields.

Another raid was carried out in August 2023 where 168 people were arrested in 26 provinces. Subsequently, the Ministry of Public Security launched a nationwide campaign against clandestine banking crimes.

Meanwhile, the attack in Chengdu is the second this month. Earlier this week, the police force in the city of Panshi in Jilin province busted another underground bank involving 2.14 billion yuan ($296 million) in cryptocurrencies and arrested six people, including suspects wanted for crimes in South Korea.

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