Tether fuels Cambodian digital marketplace that fuels ‘pig butchering’ scams

Tether may not like it, but the myth that its stablecoin is fueling criminal activity, especially violence, among gangs in Southeast Asia isn’t likely to go away anytime soon.

On July 10, blockchain analyst Elliptic Detailed Reporting Huione Guarantee, a Cambodia-based Chinese-language digital marketplace, is home to a group involved in the “pig slaughter” scam. To no one’s surprise, Tether’s USDT stablecoin is the financial grease that fuels this criminal enterprise.

Huione Guarantee acts as a trusted financial intermediary for scammers, “guaranteeing” deposits and escrow services for merchants and customers. Launched in 2021, the site initially offered a variety of legitimate products and services, but Elliptic claims that it ” [Huione’s] Its main role is to function as an illicit market.”

Thousands of merchants are active on the site through separate messaging app channels. Huione Guarantee takes a decidedly laissez-faire attitude towards merchants, stating that it “is not involved in or understands the specific business of its customers,” as well as being willfully ignorant of “the source of funds and goods” provided by merchants.

The main product/service offered is the laundering of fraudulent funds, although others offer the development of a range of fraudulent software and websites, as well as artificial intelligence (AI) “face-changing” tools that allow romance scammers to change their appearance when communicating with potential victims.

The more sinister goods available at Huione Guarantee lend credence to reports that the majority of people working in so-called “scam estates” in “special economic zones” in Cambodia, Laos and Myanmar are victims of human trafficking.

Huione Guarantee offers a variety of tools to control its captured drone workers, including batons and ankle bracelets that deliver an electric shock to workers who stray from designated areas. This is essentially a shock collar for dogs, so it’s no wonder the site refers to its slave workers as “dogs” and the people who monitor their activities and detention as “dog pushers.”

Despite its apparent criminal ties, Huione Guarantee appears to have operated with impunity, which may be because it is a subsidiary of Huione Group, a conglomerate that also owns a legitimate payments business called Huione Pay (which was reportedly removed from Huione Guarantee’s website after Elliptic’s report was published).

An offshoot of Huione Pay, Huione International Payments, is one of the merchants of Huione Guarantee, which undertakes to launder fraud proceeds. The director of Huione Pay, who has been arrested on charges of heroin trafficking and money laundering, is a cousin of Cambodia’s current prime minister, so a marketplace facilitating this crime is unlikely to face the wrath of the authorities.

Tether isn’t impressed with someone else getting bad press

While Huione Guarantee accepts legitimate payment apps and bank transfers, “payments are primarily advertised as being accepted in USDT stablecoin.” Elliptic claims that digital wallets linked to Huione Guarantee and its merchants have received “more than $11 billion” since the site launched three years ago. But Elliptic cautions that the actual figure is probably much higher, as the company cannot penetrate channels operated by certain Huione Guarantee “VIPs.”

Whatever the actual amount, it is growing rapidly. Huione Guarantee and its merchants have not received less than $1 billion in USDT in any quarter since Q1 2023. These same wallets have received over $1.5 billion in USDT per quarter since Q3 2023, approaching the $2 billion mark on several occasions.

While not all of these amounts can be explicitly linked to crime, Elliptic said, “the nature of the products and services these merchants advertise, and their overt willingness to facilitate fraud, strongly suggest that a significant portion of these payments are related to illegal activity.”

Tether has previously been warned about accounting for 84% of “pig slaughter” financial transactions, and authorities such as the United Nations have also cited USDT as playing a key role in facilitating money laundering, online gambling and cyber fraud by criminal organisations in Southeast Asia.

a ChainArgos Report A report earlier this year called laundering fraudulent proceeds “crypto’s killer app,” noting that “USDT is the most commonly used token in these scams.” Australian Financial Review He linked USDT to human slavery in a Cambodian “scam ring,” saying, “It is difficult to imagine that this slave ring could exist without cryptocurrency.”

Tether CEO Paolo Ardoino has yet to publicly comment on the report, but an anonymous spokesperson blasted Elliptic, accusing blockchain analysts of “observing fraudulent activity but choosing to document it for social media engagement and publicity rather than prioritizing intervention.”

Where there’s crime, there’s tether

Tether is clearly not happy that the public is associating its flagship product with slaves being shocked with electric batons, but in fairness, USDT’s criminal uses aren’t limited to cyber fraud, and it’s also been talked about as being useful to kidnappers and murderers in Southeast Asia.

On July 3, a 3-year-old boy Kidnapped from a shopping mall in Hong KongHis parents then received a ransom demand of just over HK$5 million (US$660,000) to be paid in US dollars. Fortunately, the kidnapping was public, so the kidnappers were caught on camera from multiple angles and were arrested the next day, and the boy was returned safely to his family.

On a sadder note, Chinese Media We recently reported on the deaths of two Chinese employees of a medical company who travelled to the Philippines last month on June 20. The family of one of the victims was contacted by a gang who claimed their son had lost money gambling in the Philippines and demanded they send 15 million RMB ($2 million) to secure his release.

The family contacted authorities in China and the Philippines, but other victims’ families also received cash demands and reportedly paid a ransom of 3 million RMB, the first payment made in accordance with the kidnappers’ instructions. Convert to USDT The funds were then transferred to a specified wallet. Sadly, the bodies of both victims were discovered by Philippine authorities on June 24th.

Tether’s inability to establish relationships with trusted banks means that USDT will soon be excluded in Europe due to new Market in Crypto Assets (MiCA) regulations. It also shouldn’t be long before US regulators and lawmakers force US-based exchanges to abandon USDT and adopt USDC, a stablecoin issued by US rival Circle.

This would make Tether even more reliant on regions such as Southeast Asia, where there is a growing perception that USDT is victimizing residents through fraud, kidnapping, murder, etc., which would not bode well for the company. Ultimately, the public’s voice for justice will become too loud for even the most corrupt governments to ignore. We believe this will be one “interference” that Tether will not welcome.

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