Demystifying the hidden corners of USDT: drug trafficking, online gambling, money laundering

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Cryptocurrencies such as USDT are becoming “green channels” for collecting drug money.

“Compared to WeChat Alipay transfers, there is no fully verifiable information on the flow of encrypted currencies. Both buyers and sellers are safe.” A drug-related person wrote on a self-built blog site. Cryptocurrency, a great experiment in financial history.

Its invention began in 2009 with a paper “Bitcoin: A Peer-to-Peer Electronic Cash System” written by an account named “Satoshi Nakamoto”. It was born with the mission of deleveraging and hard currency, and it also laid a foundation. A time bomb—due to its anonymity, it has gradually become a favorite of criminals, among which USDT (Tether) is the most popular.

Not limited to trading*****, USDT is also applied to black industries such as online gambling, money laundering, and capital flight.

The reporter interviewed and investigated the parties involved in the cryptocurrency black industry chain, trying to show the hidden corners of USDT.

Buy with USDT*****

“Compared to WeChat and Alipay transfers, there is no fully verifiable information on the flow of encrypted currencies. Both buyers and sellers are safe.” Zhou Xiao (pseudonym) wrote on a self-built blog site.

Zhou Xiao said that because of Bitcoin, people who are looking to buy “*****” need not worry. Buying Bitcoin on exchanges requires real-name authentication, but this can only prove that you have bought Bitcoin (invested in Bitcoin). As for where Bitcoin went and why, “If you don’t take the initiative to say it, no one knows.”

“You can say that you see that Bitcoin is gaining momentum this year, and you invested in some Bitcoin to play. Then you transferred to your other Bitcoin wallet. I wrote the other wallet password on paper, and it’s gone. Still looking for it.” He introduced.

Zhou Xiao runs a ***** online trading platform, mainly helping domestic players purchase *****, LSD and other new *****.

There are many people like Zhou Xiao who use cryptocurrency to buy and sell ***** and “make money”.

According to Zhengyi.com, a couple in Changchun City used Bitcoin addresses to collect and transfer drug money.

His wife Liu gave her Bitcoin account to her husband Ma. Ma used the account to collect drug funds and withdrew cash to Liu’s bank card to transfer drug funds, totaling more than 100,000 yuan.

After reviewing the case, the prosecutor believed that Liu still provided his Bitcoin account to Ma to collect drug funds and provide bank cards to transfer drug funds when he knew that Ma was selling *****. This behavior complies with the elements of money laundering crime .

On January 20 of this year, the court adopted the prosecution’s sentencing recommendations in court. Ma constituted the crime of trafficking and was sentenced to three years and two months in prison, and Liu constituted money laundering and was sentenced to six months in prison. .

Zhou Xiao is at large because his Bitcoin address is difficult to trace. He stated that his Bitcoin addresses are generated offline in batches using the elliptical encryption algorithm, and addresses and corresponding keys are generated at will, and they are generated at will without restriction.

Zhou Xiao once chose 3 cryptocurrencies for transfers: Bitcoin, USDT and his own E-RMB.

He chose Bitcoin at first. Later, due to the BTC price drop in the bear market, the seller requested a hedge transaction, so he used the stable currency USDT to transfer.

USDT is a cryptocurrency pegged to the legal tender U.S. dollar launched by Tether. 1USDT=1 U.S. dollar, that is, for every USDT token issued, its bank account will be guaranteed by 1 U.S. dollar.

He is also preparing to launch the electronic RMB E-RMB recently. He introduced that the security and privacy of the currency are highly improved, and the value of the currency is stable. It is always anchored at a price of RMB 1:1, and is limited to old users who have bought it.

There are more and more people like Zhou Xiao who are proficient in cryptocurrency and use it flexibly. They are walking on the edge of the law, under the concealment of cryptocurrency, “making money with their lives.”

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The gray world of cryptocurrency

“I have nine hundred thousand U (USDT) in my account.” Aiba (a pseudonym) runs an offline casino in Mongla, Myanmar. He told the author that he needs to exchange cash into cash or USDT every day.

Chainalysis report data shows that from July 2019 to June 2020, more than 50 billion U.S. dollars of cryptocurrency was transferred from addresses in East Asia to addresses overseas. Of which over 18 billion US dollars is USDT.

There are three main uses of cryptocurrency in the gray industry: drug trafficking, online gambling and capital flight. This is a hidden gray industrial chain, mixed with fish and dragons.

Taking cross-border transfer as an example, Yizhihu users introduced their own cross-border transfer operations in 2016: buy bitcoins on domestic exchanges, transfer to Bitfinex, before withdrawing, the platform must verify personal information and fill in the ID according to the prompts. Passport, proof of address. After the withdrawal, the platform will charge a handling fee of 0.1%, with a minimum of $20. This completes the entire Bitcoin cross-border remittance process.

People familiar with the matter told Deepchao TechFlow that the above is practical. They have tried to call the Chinese address to the US exchange and transfer the US dollar to the US account, “but this is just an example.”

If the above operations are limited to personal exploration and need to bear their own risks, then with the popularization and development of digital currencies, there is now an industry chain for cross-border remittances using encrypted currencies.

“We do U.S. dollars and Australian dollars.” Ji Nan (pseudonym) said that he provides the service of collecting U (USDT) out of legal currency (spot exchange), and only needs to “tell us whether the receiving bank is a private account or a public account, and which bank is registered. In which region you register, your account will be credited within one working day”. If the customer is a household, it will be in the name of borrowing or arrears; if the customer is a public account, it will be in the name of labor remuneration.

Ji Nan introduced that compared with traditional bank wire transfers, which can last for several weeks and are as high as 5%, the handling fee for USDT transfer is lower (close to 0), and the transfer arrives instantly.

“The minimum is 5000 (USDT), the upper limit is not capped, and the single transaction exceeds 1 million (USDT). Just tell me in advance.” Ji Nan said that the purpose of customer transfer is generally for US stock transactions or house purchases and immigration.

Compared with the above-mentioned “simple” operations for cross-border transfers, the professional running group of cryptocurrencies is more secretive and large.

The word “run score” originated from the performance testing of computers or mobile phones, but the run score in the payment field has new meanings.

In the past, the ***** platform would acquire a large number of bank cards to collect money. But to do so, the cost is very high-to receive a bank card, the cost is hundreds of thousands. Once the bank card was blocked, the money was lost.

After 2018, the running sub-mode began to emerge. There are many running sub-platforms in the market, and they use crowdsourcing to greatly reduce the cost of money laundering. These running sub-platforms claim that “just a QR code can make money while lying at home.”

Stablecoin running points players pay a deposit (for example, 10,000 yuan) on the running points platform and upload their WeChat and Alipay QR codes for payment. The top-up player transfers the money to the running point player through the docking of the payer, and the running point ends after receiving 10,000 yuan. The running points platform will give the running points a certain percentage of the collection commission, and transfer the 10,000 yuan deposit to the betting platform.

“Similar to Didi Dache, which transports funds, Didi Dache transports people, and we transport money.” According to the runners, during the whole process, the gambling platform does not participate in the flow of funds, and the runners become money laundering tools.

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USDT running points is a new mode of payment using digital currency running points. The traditional running score is RMB; the USDT running score is USDT.

According to the above-mentioned runners, the biggest advantage of USDT running is decentralized trading. “It’s all customers and our drivers (acceptors) who are trading. There is no capital pool in between, which effectively prevents funds from being frozen on a large scale. With USDT as a block, the whole process is a traceless transaction and will not be traced to whereabouts. Our transaction volume is large enough to be scattered”.

“We provide deposit and withdrawal services for the gaming platform.” The previous QQ runner said that trading with the encrypted currency USDT, “Use the principal to earn commissions, a single settlement, 10,000 principals earn 150-200 yuan commission, Return directly to your bank card.”

According to Deepchao TechFlow, this type of running sub-groups drain traffic on platforms such as QQ Group, Baidu Tieba, Xianyu, and then communicate transaction details with communication software such as Bat, Telegram, and Paper Plane, and buy cryptocurrencies on exchanges. The currency is transferred to the running sub-platform, and the most commonly used cryptocurrency is USDT.

“There are some who run U, U enters Y (renminbi) out. That kind of very few, more than 90% are fraudulent funds or scammers.” Aiba said that even if they meet and trade, they suddenly disappear.

The French Open is in full swing, without omission, and a crackdown on cryptocurrency money laundering is coming.

Strike hard

“It can’t be as rampant as before.” Aiba introduced that the wind has tightened recently. He no longer accepts USDT business, but uses cash for cash exchange, the ratio is 100:105.

On September 24, at the 9th China Payment and Settlement Forum held in Beijing, Liao Jinrong, director of the International Cooperation Bureau of the Ministry of Public Security, pointed out that the annual outflow of gambling funds from China exceeds one trillion yuan, and the specifically named cryptocurrency is used to transfer gambling funds. .

“In recent cases, it was discovered that some gambling gangs used virtual currency to collect and transfer gambling funds, and even used virtual currency investment as an excuse for online gambling in some parts of Myanmar. This type of new digital currency channel cannot be frozen, and it is difficult to trace the source of anonymity. , Has brought great challenges to our crackdown on governance.”

Since the beginning of this year, “anti-money laundering” and card-breaking operations have been carried out in full swing across the country.

On October 10, the State Council’s inter-ministerial joint meeting on cracking down on new types of illegal and criminal telecommunications networks deployed a nationwide “card break” operation to severely crack down on illegally issuing and selling phone cards and bank cards.

And cryptocurrency is undoubtedly the key area of ​​the crackdown. Some cryptocurrency OTC merchants were also affected by this, and were frozen and even investigated.

According to the criminal law on money laundering crime case filing standards, “provide a fund account” for money laundering, and the person who provided the account will be prosecuted. The maximum penalty is “” a fixed-term imprisonment of not less than five years but not more than ten years, and the amount of money laundering shall be more than 5% Fines below 20%”.

On June 8 this year, the Huizhou police destroyed a criminal gang that used USDT digital currency to operate a fourth-party payment platform. A total of 76 suspects were arrested, 4 online payment studios were investigated and 2 online gambling gangs were destroyed. .

This case is the first case in the country that used USDT digital currency to provide online payment services for illegal and criminal activities. After preliminary verification, the platform has been in operation for nearly 15 months, providing financial settlement services for 120 overseas gambling websites and 70 investment fraud platforms, and the amount involved is 120 million yuan.

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Deep Tide TechFlow found that USDT is becoming more and more popular with criminals because of its stable value and concealment. Regardless of drug trafficking, online gambling, or cross-border transfers, all used are USDT without exception.

USDT as the culprit?

Unlike the popular belief, the most popular cryptocurrency in China is not Bitcoin, but USDT.

According to the Chainalysis report, USDT defeated Bitcoin in June this year and became the most popular cryptocurrency in East Asia. Among them, China has the highest proportion. According to the report, “Tether has become a de facto alternative to legal currency for Chinese cryptocurrency users, and is the main means of transitioning to Bitcoin and other standard cryptocurrencies.”

Stablecoins According to Google Trends, USDT fever is the largest in mainland China, radiating to the entire Chinese area. The current total market value of USDT exceeds 19.1 billion U.S. dollars, but in 2017, this number was almost 100 million. In just three years, the market value of USDT has achieved a 191-fold leapfrog growth.

Where are these rapidly added USDT application scenarios?

As early as July 2019, Coindesk reported a case of USDT being used in cross-border trade in Russia. “20% of sales are Bitcoin and 80% are USDT.” A Russian OTC businessman said, “Chinese companies bought The total purchase of USDT in one day can reach 10 million to 30 million US dollars.”

In fact, USDT has become the most “out-of-circle” cryptocurrency, and it has the closest connection with gray production. The crimes surrounding USDT have intensified. According to data from China Procuratorate, there have been 85 USDT-related crimes this year, and there were only 5 cases before 2020.

This trend has been noticed by various countries’ supervision, and legislation is approaching.

The European Union formally proposed a regulatory framework for encrypted assets and stablecoins in September, making it clear that all encrypted assets not covered by the EU’s existing financial laws will be included in the supervision.

A few days ago, the British Ministry of Finance issued a statement that it is drafting and regulating private stablecoins and is also studying the possibility of central bank digital currencies as cash substitutes.

Back in China, Article 22 of the revised Opinion Draft of the People’s Bank of China published on October 23, 2020 stipulates: “No unit or individual may make or sell tokens, coupons and digital tokens to replace RMB in Circulate in the market.”

According to the above, USDT has replaced the renminbi fiat currency in cross-border transfers, money laundering and other fields, and it is also the de facto fiat currency substitute for Chinese cryptocurrency users.

Will the stable currency USDT thunder? When is a thunderstorm? This is probably a question hanging over the heads of every cryptocurrency user.

In the eyes of some geeks, technology is innocent and is only used by malicious people. However, the emergence of more and more criminal cases of cryptocurrency is also reminding us that technology cannot completely remove responsibility for the evil of human nature.

“The Genie is out of the Bottle” (the monster has released the bottle). Bitcoin wallet company Xapo president Ted Rogers described the BCH fork civil war this way. This proverb comes from the story of Aladdin’s magic lamp in “One Thousand and One Nights”, which means that once the monster releases the bottle, it will have an irreversible negative impact on the world. This sentence can still be used in cryptocurrencies such as USDT.

“Bitcoin is born with the mission of deleveraging and hard currency. USDT is the source of high leverage in current exchanges. It is theoretically good for a currency to be used by more people, but if its use is limited to black production and speculation, shouldn’t it? Examine the original intention of cryptocurrency?” Pan Chao, the head of MakerDAO China, once commented.

(Respect the opinions of interviewees, Zhou Xiao, Aiba, and Ji Nan are all aliases)