Reports have repeatedly suggested that billions of dollars worth of Tether have been laundered after pig slaughters and sextortion — a problem that is getting worse, not better.
A new in-depth report has revealed how the USDT stablecoin is being widely used as a payment method in a criminal market, with illicit wallets receiving over $11 billion over the past three years.
Blockchain analytics company Elliptic He says Tether is the primary payment method for a platform called Huione Guarantee, which facilitates transactions on behalf of cybercriminals and their clients.
Some traders claim they can help launder money, particularly from illegal pig slaughters. Others say they are willing to help deal with the proceeds of sextortion scams.
For starters, pig slaughter scams see scammers gradually gain the trust of unsuspecting individuals – often by feigning romantic interest – and encourage them to gradually put their entire life savings into crypto investments that are too good to be true.
With Huione’s assurance, it also became possible to hire people to create websites for these fake investment opportunities — and to have “AI face-changing” software so that the scammers could convincingly communicate with their prey.
Billions of dollars have been lost to pig slaughter, but it’s easy to overlook the fact that the people who carry out these crimes are often victims themselves. They often travel to Southeast Asian countries like Cambodia and Myanmar in the hope of finding high-paying work, only to be imprisoned and have their passports confiscated.
Horrifyingly, there are also tools sold on the Huione Guarantee website to torture these workers, including shackles that deliver electric shocks – and batons to beat them with.
“Some of these forced workers resort to suicide or die in suspicious circumstances,” Elliptic’s investigations warned.
The authors point to “overwhelming evidence” that “Huione Guarantee’s predominant role is to operate as an illicit marketplace.” In another surreal twist, the platform appears to have ties to a large Cambodian company that has interests in everything from airlines to real estate, with one executive closely linked to the country’s prime minister.
While the report puts the massive scale of pig slaughter scams in a new light, Elliptic said one benefit of crypto payments is “blockchain transparency,” where USDT flows can be monitored and frozen to deprive scammers of revenue.
“Following our investigation, hundreds of cryptocurrency addresses controlled by Huione companies and used by merchants running Huione Guarantee have been categorized in Elliptic tools,” the company added.
Continued repression
There has also been growing evidence that Tether is being used to organize criminal activities in China, where cryptocurrencies are banned.
Last May, police busted a large underground gang that allowed individuals to bypass strict foreign exchange rules and send money abroad, with local media reporting that $1.9 billion had been transferred abroad.
The UN also highlighted the issue in January, when it claimed that USDT on Justin Sun’s TRON blockchain “has become the preferred choice for regional cybercriminals and money launderers alike due to its stability, ease of transactions, anonymity and low fees.”
Over a 12-month period, it was estimated that more than $17 billion worth of Tether was “linked to black market exchanges, illegal commodity trading, illegal collection and payment operations, and various criminal activities.”
There is also growing evidence that the kidnappers are demanding USDT as ransom. Two unemployed women kidnapped a three-year-old boy from a Hong Kong shopping mall, then left a note ordering his mother to deposit $640,000 in Tether into her wallet. The perpetrators were later arrested, and fortunately the boy was unharmed.
A recent report from TRM Labs went on to say that Tether was the most traded stablecoin in terms of illicit transaction volume — with an estimated 1.63% of trades involving criminal activity. In comparison, that number dropped to just 0.05% of transactions involving USDC.
This also has implications when it comes to terrorist financing – and while cryptocurrency exchanges and payment processors have cracked down hard in recent years, TRON remains popular.
“Among terror financing campaigns that continued to accept cryptocurrencies, the number of unique TRON addresses receiving Tether (USDT) increased by 125%,” the report noted.
In response to these allegations, a Tether spokesperson told Bloomberg:
“Historical evidence repeatedly suggests that transaction figures have often been inflated due to misinterpretations of the data that assume that if a service receives a small fraction of illicit funds then all of the funds in the service are illicit, greatly inflating the actual values.”
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