Reports have increasingly highlighted that billions of dollars in Tether (USDT) have been laundered following pig butchering and sextortion scams, and the situation is deteriorating.

A comprehensive new report reveals that the USDT stablecoin is extensively used as a payment method in criminal marketplaces. Over the past three years, illicit wallets have received more than $11 billion in Tether.

The blockchain analytics firm Elliptic states that Tether is the primary payment method on a platform called Huione Guarantee, which facilitates transactions for cybercriminals and their customers. Some merchants claim they can assist with money laundering, particularly with ill-gotten gains from pig butchering scams. Others offer to handle proceeds from sextortion scams.

Understanding Pig Butchering Scams

Pig butchering scams involve fraudsters gradually gaining the trust of unsuspecting individuals, often by pretending to be romantically interested. They then encourage these individuals to invest their life savings into seemingly lucrative but fake crypto investments.

Through Huione Guarantee, scammers can hire people to create websites for these fake investment opportunities and acquire “AI face changing” software to convincingly communicate with their targets.

The Human Cost

Billions have been lost to pig butchering scams. However, the people carrying out these crimes are often victims themselves. Many travel to Southeast Asian nations like Cambodia and Myanmar seeking high-paying jobs, only to find themselves imprisoned and their passports confiscated.

“Some of these forced workers resort to suicide or die in suspicious circumstances,” the Elliptic investigation warned.

Huione Guarantee’s Role

Items sold on Huione Guarantee to torture these workers include shackles that deliver electric shocks and batons for beating. The platform has ties to a large Cambodian firm involved in various industries, with one executive closely related to the country’s prime minister.

Elliptic’s report highlights the scale of pig butchering scams and mentions that one advantage of crypto payments is the transparency of the blockchain, which allows the monitoring and freezing of USDT flows to cut off scammers’ revenue.

“Following our investigations, hundreds of cryptocurrency addresses controlled by Huione companies and used by merchants operating on Huione Guarantee have been labeled in Elliptic’s tools,” the report added.

Clampdowns and Global Impact

There is growing evidence of Tether being used to orchestrate criminal activities in China, where cryptocurrencies are banned. In May, a large underground gang helping individuals bypass strict foreign currency rules was busted, with $1.9 billion transferred overseas.

The United Nations highlighted the issue in January, stating that USDT on Justin Sun’s TRON blockchain had become a preferred choice for regional cyberfraud operations and money launderers due to its stability, ease of use, anonymity, and low fees.

In a 12-month period, estimates suggested over $17 billion in Tether was linked to underground currency exchanges, illegal commodity trades, unlawful payment processes, and various criminal activities.

There is also evidence of USDT being demanded as ransom by kidnappers. In Hong Kong, two unemployed women abducted a three-year-old boy and demanded $640,000 worth of Tether. The culprits were arrested, and the child was unharmed.

Stablecoin Comparisons and Terror Financing

A TRM Labs report indicates that Tether has the most illicit volume among stablecoins, with 1.63% of trades linked to criminal activity. By comparison, USDC had only 0.05% of transactions involving criminal activity.

This trend also impacts terrorism financing. Despite efforts by crypto exchanges and payment processors to clamp down on illicit activities, TRON remains popular. The number of unique TRON addresses receiving Tether (USDT) for terror financing rose by 125%.

Addressing these allegations, a Tether spokesperson told Bloomberg:

“Historical evidence repeatedly shows that transactional figures have often been exaggerated due to a misinterpretation of data that assumes that if a service receives some small portion of illicit funds then all funds in the service are illicit, significantly inflating the actual values.”

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