They are facing charges of money laundering, cocaine distribution, identity fraud, and bribery. The cooperation of international agencies allowed conducting the investigation.
After four years of investigation, the US Department of Justice reported that alleged money smugglers linked to Mexican drug cartels “used the stablecoin Tether (USDT) for their operations.”
Assistant Attorney General Brian Rabbitt explained that this alleged criminal organization “laundered drug proceeds for the Mexican cartels.” Rabbit also said that the drug traffickers and money launderers “will go to court wherever they are.”
At least six Chinese people participated in a conspiracy to launder around USD 30 million in drug proceeds, the Department of Justice reported. They are now facing charges that include a conspiracy to launder money, distribute cocaine, and attempt identity fraud and bribery.
Xinizhi Li, Jiayu Chen, Eric Yong Woo, Jingyuan Li, and Tao Liu are already in prison. The sixth member of the criminal band is Jianxing Chen, who is at large and with an international arrest warrant.
Besides cryptocurrencies, they also reportedly used casinos, front companies, bank accounts, and cash to commit their crimes.
Bribing the Wrong Person
Tao Liu allegedly bribed a State Department official with bank transfers and cryptocurrencies. He expected to obtain US passports for himself and his associates.
This official was an undercover police officer, of which Liu and the rest of the defendants were unaware. There were records of the bribes, which he incorporated as further evidence in the investigation and subsequent complaint.
The Drug Enforcement Administration kept the USDT address to which Liu sent the cryptocurrencies under control.
International Cooperation Was Key to Investigation
If the US Department of Justice finds the defendants guilty, they could face penalties depending on each one’s participation in the criminal band. None of them would spend less than 10 years in prison and some could even reach life imprisonment.
US Attorney for the Eastern District of Virginia, Zachary Terwilliger, explained that the result was possible thanks to the collaboration of the “agencies around the world.”
USDT Centralization Is Disadvantageous for Crime
Those who want to evade government controls have long used the Tether token, which has parity with the US dollar. For example, Russian and Chinese traders widely use this currency to make cross-border payments.
Its massive use gives USDT liquidity, which facilitates transactions. The disadvantage is that, unlike Bitcoin, USDT is a centralized token. For this reason, the issuing entity can restrict its use.
There are a hundred “frozen” Tether addresses at the time of writing this article. The company responsible for this token activates the use ban whenever a court order requires it.
USD Coin (USDC), Gemini Dollar (USDG), and PAX, from Paxos Standard, among other centralized stablecoins, are susceptible to unilateral freezing. In the latter case, the contract even enables the Paxos Company to “erase” the balance of an address so that the authorities can confiscate the assets that back it.
National governments are aware that stablecoins exist and that some people use them for illegal purposes. For that reason, they become increasingly strict in the controls and regulations on those financial instruments.
By Willmen Blanco
