Another Case in China’s USDT Crackdown! Chengdu Uncovers a Massive Underground Money Exchange Operation Worth 13.8 Billion Yuan, 193 Suspects Arrested

In a nationwide effort to crack down on illegal foreign exchange activities involving USDT, the largest USD stablecoin globally, the Chengdu Public Security Bureau recently uncovered an underground financial operation amounting to 13.8 billion yuan. The suspects used USDT to circumvent national foreign exchange controls, illegally providing foreign exchange settlement channels.

In 2023, under the direction of the Economic Investigation Bureau of the Ministry of Public Security and the Economic Investigation Brigade of the Sichuan Provincial Public Security Department, and with support from the Anti-Money Laundering Division of the People's Bank of China (PBOC) Sichuan Branch and the State Administration of Foreign Exchange Sichuan Branch, the Economic Investigation Team and Longquanyi District Branch of the Chengdu Public Security Bureau formed a joint task force.

This task force successfully dismantled a large-scale underground financial network spanning multiple provinces, dismantling two major hubs in Fujian and Hunan, involving 13.8 billion yuan, and solving one case each supervised by the Ministry of Public Security and the Provincial Public Security Department. A total of 58 cases were filed by public security organs across 26 provinces (municipalities and autonomous regions), resulting in the arrest of 193 suspects and the freezing of 149 million yuan involved in the cases.

In November 2023, the case was transferred to the Chengdu People's Procuratorate for prosecution.

Zhong Yu, the captain of the Eighth Team of the Economic Investigation Detachment of Chengdu Public Security Bureau, mentioned that in November 2022, the Longquanyi District Branch uncovered illegal foreign exchange operations linked to an underground financial network during a case involving obstruction of drug management.

Subsequently, the Chengdu Public Security Bureau quickly established a task force led by senior bureau officials, composed of members from economic, cyber, legal, and technical investigation units, as well as the Longquanyi District Branch, to formally investigate this case.

On June 1, 2023, under the direction of the Ministry of Public Security and Provincial Public Security Department, the task force divided into six teams and conducted arrest operations in Shanghai, Changsha, Nanjing, Shenzhen, Fuzhou, and Jinhua, capturing 25 suspects including Lin, Weng, and Chen. They seized numerous bank cards and U shields used in the operations.

Investigations revealed that since January 2021, this criminal group, led by individuals like Lin, Weng, and Chen, and originating from import-export business, used USDT to facilitate illegal foreign currency exchange and payment settlement services for clients needing to transfer funds abroad.

This primarily supported smuggling of pharmaceuticals and cosmetics, overseas asset purchases, and was coupled with fraudulent VAT rebate schemes through financial settlements with other companies.

Further investigation found that the criminal group exploited USDT as a medium to evade national foreign exchange controls, illegally providing foreign exchange settlement channels, posing significant risks to national foreign exchange and financial security.

Chinese media reports describe USDT as a virtual currency pegged to the legal tender USD, allowing users to exchange USDT for USD at a fixed ratio.

The criminal group's illegal foreign exchange operations led to a cascade of financial fraud, official misconduct, obstruction of drug management, smuggling of goods prohibited by the state, interference with credit card management, and fraudulent export tax rebates, posing significant social risks and severely undermining economic and financial order.

In August 2023, the task force used these leads in a national concerted operation deployed by the Ministry of Public Security, capturing an additional 168 suspects across 26 provinces (municipalities and autonomous regions), marking one of the largest victories in Sichuan Province’s recent actions against underground financial networks.