Chinese Police Raids Illegal $1.9B USDT Banking Operation: Report

Chinese police forces have blown up a major underground 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 From 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 operation site.

A secret banking operation worth $1.9 billion

Investigations conducted by police forces since 2021 revealed that the secret banking operation was headed by a criminal gang, which originated from the Chinese import and export business. They used USDT to run foreign currency payment and settlement businesses, providing illegal services to cosmetics and drug traffickers and locals who acquired foreign assets.

In addition to using the stablecoin to transfer money abroad, the gang collaborated with other companies to fraudulently obtain tax refunds. The police force also found that USDT was being used to evade national foreign exchange supervision, posing a threat to the country's financial security.

Besides providing illegal channels for foreign exchange settlement, the gang's operations are also linked to job-related crimes, smuggling of contraband, and financial fraud such as obstruction of credit card administration and export tax refund fraud.

Fighting Chinese underground banks

The Longchuan District Branch of the Chengdu Municipal Public Security Bureau first discovered the operation in November 2022 when it handled a drug case, which involved the settlement of money through underground banks.

In June 2023, the Ministry of Public Security established 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 confiscation of several payment instruments, including bank cards and U-shields.

Another raid was carried out in August 2023 in which 168 people were arrested in 26 provinces. Later, the Ministry of Public Security launched a national campaign against underground banking crimes.

Meanwhile, the raid in Chengdu is the second this month. Earlier this week, police forces in Banxi City, Jilin Province Cracked Another underground bank held 2.14 billion yuan ($296 million) in cryptocurrencies and arrested six individuals, including suspects wanted for crimes in South Korea.