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Tether, one of the world’s largest cryptocurrency platforms, has emerged as one of the leading payment methods for money launderers and fraudsters operating in south-east Asia, the UN has warned.
According to a report published on Monday by the UN’s office on drugs and crime, Tether’s crypto token, also known as tether, is at the heart of an exploding industry of scams, including those that engineer false romantic connections to gain a victim’s trust before luring them to transfer large sums — a strategy commonly referred to as “pig butchering”.
“In recent years, law enforcement and financial intelligence authorities have reported the rapidly growing use of sophisticated, high-speed
money laundering . . . teams specialising in underground tether,” the report said.
The evolution of cryptocurrency, alongside other rapid technological developments, has also galvanised the decades-old practice among south-east Asia’s organised crime gangs of using black market casinos to launder illicit funds.
“Online gambling platforms, especially those operating illegally, have emerged as among the most popular vehicles for cryptocurrency-based money launderers, particularly for those using Tether,” the report says.
Jeremy Douglas of the UN’s office on Drugs and Crime told the FT: “Organised crime has effectively created a parallel banking system using new technologies, and the proliferation of loosely or entirely unregulated online casinos together with crypto has supercharged the region’s criminal ecosystem.”
Tether’s digital token is a stablecoin — a cryptocurrency that typically tracks a hard currency to stabilise the price. Tether is pegged to the US dollar and allows traders to move in and out of crypto trades, unlike cryptocurrencies such as bitcoin that are not pegged to hard currencies and are predominantly used for speculation. It is the largest of its kind with roughly $95bn in circulation.
The UN report notes that in recent years authorities have dismantled several money laundering networks responsible for moving illicit Tether funds, including an operation that recovered $737mn in cash and crypto by Singaporean authorities last August.
In November last year, following a joint investigation with US authorities and crypto exchange OKX, Tether froze $225mn worth of its tokens connected to a “pig butchering” and human trafficking syndicate in south-east Asia, the report says.
Erin West, a criminal prosecutor and cyber crime expert based in California, said pig butchers gravitated to Tether’s digital coin because the cryptocurrency promised speedy, irreversible transactions on a blockchain.
“Tether is the mechanism of choice . . . it’s fast and transactions cannot be retracted. Once money is moved, it’s moved. You can’t pull it back,” West said.
“You’re creating a situation where victims are blinded by love, coupled with the opportunity to get rich quickly . . . They’re being asked to buy something that they’re not familiar with, and prior to cryptocurrency there weren’t many opportunities to do that,” she added.
Douglas said: “Cryptocurrency regulations are way behind [the illicit activity] or practically non-existent, and organised crime groups who use and feed off vulnerabilities and weaknesses know this.”
Despite a broad enforcement crackdown on digital assets in the US and elsewhere, criminal groups have continued to embrace Tether’s token as an effective method of moving funds, to the point where some casinos have begun specialising in handling the token.
According to documents seen by the FT, one money laundering syndicate in Shan State, Myanmar that also operates in Cambodia has even hung a sign on a busy street advertising Tether and promising to exchange “black” tokens for cash.
Tether did not respond to a request for comment.
In November last year the stablecoin operator announced it brought US authorities on to its platform in order to help prevent illicit use of its token. The number of blacklisted Tether wallets has since surged by roughly 27 per cent, according to industry data provider CCData.
Tether has fallen under regulatory scrutiny in recent years over the management of its assets and ties with financial institutions.
In 2021, US regulator the Commodity Futures Trading Commission alleged Tether made misleading statements about having enough dollars to back its stablecoin. Tether paid a $41mn fine without admitting liability.
In November last year the FT revealed Tether deposited more than $1bn with a subsidiary of Britannia Financial Group, founded by Venezuelan-Italian banker Julio Herrera Velutini, who in August 2022 was charged by US authorities in an alleged bribery scheme. Velutini has denied the accusations and Britannia Financial was not accused of any wrongdoing. The case is continuing.
