Chinese authorities have uncovered a vast underground banking network that utilized the popular stablecoin Tether (USDT) to facilitate illegal transfers totaling up to 13.8 billion yuan ($1.9 billion). The operation, which was recently disrupted by the Public Security Bureau of Chengdu Municipal, resulted in the arrest of 193 suspects and the freezing of 149 million yuan ($20.6 million).

Illegal Activities Unveiled

Investigations dating back to 2021 revealed that the criminal gang behind the underground banking operation primarily targeted the Chinese import and export business. They utilized USDT to conduct foreign exchange payment and settlement services, catering to cosmetics and drug smugglers, as well as individuals seeking to acquire foreign assets illegally.

Additionally, the gang collaborated with other entities to fraudulently obtain tax refunds, further exacerbating their illicit activities. The use of USDT enabled them to evade national foreign exchange supervision, posing a significant threat to China's financial security.

Multifaceted Criminal Network

Beyond facilitating illegal foreign exchange transactions, the gang's operations were also tied to a range of other criminal activities, including job-related crimes, smuggling contraband goods, and financial fraud such as credit card fraud and export tax refund scams.

Government Crackdown

Efforts to combat underground banking in China have intensified in recent years. The discovery of this operation by the Longquanyi District Branch of the Chengdu Municipal Public Security Bureau in November 2022 marked the beginning of an extensive investigation.

In June 2023, a task force established by the Ministry of Public Security conducted raids in six municipalities across the country, resulting in the arrest of 25 suspects and the confiscation of numerous payment instruments. Subsequent nationwide campaigns targeted underground bank crimes, leading to further arrests and seizures.

Continued Vigilance

The recent crackdown in Chengdu follows a similar operation earlier this month in Panshi City, Jilin Province, where authorities dismantled another underground bank involving cryptocurrencies worth 2.14 billion yuan ($296 million). These efforts underscore the Chinese government's commitment to combating financial crimes and maintaining the integrity of its financial system.

As authorities continue to uncover and dismantle illicit financial networks, the public is urged to remain vigilant and report any suspicious activities to law enforcement agencies.