|
Getting your Trinity Audio player ready… |
Stop us if you’ve heard this one, but ‘pig butchering’ scammers rely on a combination of Tether and Bahamian banks to launder their ill-gotten gains.
- Huione money laundering 101
- The inevitable Tether/Bahamas connection
- Huione’s stablecoin
- Tether ‘engaging’ with ‘thinking’ about ‘discussing’ Big-Four audit
On March 23, the New York Times dropped an investigative report into Southeast Asia-based scammers and their reliance on the infamous Cambodia-based Huione Guarantee darknet marketplace that offers scammers the tools of their trade—everything from software to web development to cattle prods for shocking their enslaved drones who don’t make their quotas.
Huione also offers opportunities to help launder the loot obtained via these scams. This involves a so-called ‘matchmaker’ who maintains a worldwide network of ‘mules’—either individuals or shell companies that control bank accounts or digital asset wallets—who can help move money within hours of it landing in their hands.
The matchmaker will claim around 15% of the total being laundered as payment for himself and his mules. Funds being laundered in China garner much higher commissions (up to 60%), reflecting the regime’s no-nonsense efforts to protect its citizens from these scams.
The percentage also depends on the nature of the scam and the likelihood that victims will report the crime to the authorities (many ‘romance scam’ victims can be too embarrassed to come forward, while financial scam victims fear being scolded by friends and family for being so gullible).
The matchmaker sends the mules’ bank/wallet info to the scammer, who relays this info to the individual(s) being scammed. Once the victim sends the cash, it gets bounced around by the mules before ultimately being converted into digital assets. The mule takes his/her cut and sends the rest to the matchmaker, who takes their cut before forwarding the remaining sum to the scammer(s).
Also, various Huione affiliates are taking a cut along each step of this process. Huione Group, an ostensibly legitimate financial conglomerate, claims to be unaffiliated with its illegitimate namesakes. However, Huione Guarantee—which was rebranded as ‘Haowang Guarantee’ following last year’s reports of its unsavory activities—proudly tells its customers that Huione Group is one of its “strategic partners and shareholders.”
Another affiliate, Huione International Pay, is said to be a ‘matchmaker’ itself, while other departments handle customer relations for scammers, track mule accounts, and monitor the Telegram channels in which hundreds of thousands of users offer goods and services.
The work of the matchmakers is said to be so constant and repetitive that it’s known in China as ‘moving bricks.’
The ’guarantee’ in Huione/Haowang Guarantee stemmed partly from its willingness to provide escrow services for the matchmakers/mules. This enforces ‘honor among thieves,’ ensuring that the scammers don’t become victims themselves.
There’s always a Tether connection
The actions of the money mules are where the spectre of ‘crypto’ generally rears its ugly head. Mules take the most risk and are the most active members of this laundering chain, rapidly shifting small sums between many bank accounts, most of which aren’t open for very long.
The Times cited one court case in which the funds obtained from U.S. scam victims were sent to unspecified banks in the Bahamas. From there, the funds were used to buy USDT, the market-leading stablecoin issued by Tether—a name that looms large in all pig butchering conversations—via the Binance digital asset exchange. The USDT is later converted to cash at a Cambodian casino or using Huione’s official payment channels.
Tether’s struggles to maintain U.S. banking relationships are the stuff of legend, leading to its deep ties to Bahamas-based Deltec Bank & Trust. Tether has been linked to other Bahamas-based financial institutions, including Capital Union Bank and Britannia Bank & Trust. Last September, Deltec sold its private clients line of business to Britannia.
Following last year’s exposé by the blockchain analysis firm Elliptic, Tether froze nearly $30 million worth of USDT linked to Huione. However, Elliptic noted that this might have had more to do with the same wallet receiving funds associated with North Korea’s state-sponsored hackers Lazarus Group.
Regardless, Elliptic estimated that “over $11 billion” worth of digital assets (primarily USDT) had flowed through Huione over the past three years, making this frozen $30 million a drop in the bucket. In its July 2024 report, Elliptic said there hadn’t been a single quarter in which less than $1 billion worth of USDT was received by Huione merchants since Q1 2023.
Stableconned
Still, there may be some impact on Huione’s activities from Tether’s belated compliance. While USDT remains popular on the site, Elliptic reported in January that Huione had launched various bespoke ‘crypto’ products, including its exchange, network and dollar-denominated stablecoin (USDH). Huione promoted USDH for its ability to avoid “the common freezing and transfer restrictions of traditional digital currencies.”
In February, blockchain security firm CertiK issued a public apology for auditing the USDH smart contract for a fee. While CertiK’s audit flagged several security issues with the contract, Huione posted the audit on its website anyway, apparently concluding that most users would just see the CertiK logo and skip the fine print.
To some observers, the mere fact that CertiK performed the USDH audit served as an endorsement of the group behind the project, a view the company vehemently rejected (albeit with some egg on its face). CertiK co-founder Ronghui Gu later tweeted that the company had been “contacted by a third-party dev agency, so we failed to link it to the fraudsters until much later … deeper due diligence and extra alerts would have helped.”
But others pointed out that CertiK’s since-deleted USDH audit report included the name Huione. Given that the audit was performed just five months after Elliptic’s bombshell report, many feel that CertiK should have been more aware of what they were being asked to inspect.
Tether’s getting engaged
Interestingly, the Times report on Huione came just as Tether CEO Paolo Ardoino and Tron founder Justin Sun are set to address a panel at this week’s DC Blockchain Summit event. The panel, T3 FCU: Coming Together on Cyber Crime, will focus on the T3 Financial Crime Unit, a crypto crime-fighting initiative involving Tether, Tron and blockchain analysts TRM Labs that launched last year.
While the total volume of USDT issued on the Tron blockchain ($64.7 billion) is currently below USDT issued on the Ethereum network ($75.9 billion), it wasn’t always thus. It was only after USDT on Tron earned an unwanted reputation as the preferred currency of criminals and terror groups that USDT’s shift back to Ethereum began in earnest.
Tether has been trying to clean up its regulatory act in the hopes of not being banished from the U.S. market following the expected passage of new stablecoin legislation. Tron’s Sun has been taking a more direct route, buying favor with the new administration by putting money directly in the president’s pocket, a gambit that so far appears to be working as designed.
Apart from printing the criminal world’s reserve currency, one of the principal concerns surrounding Tether is the lack of independent confirmation of the reserve assets allegedly backing the now $143.5 billion in circulating USDT.
Despite years of assurances that a comprehensive third-party audit of its reserves was in the works, Tether has only ever issued quarterly ‘attestations’ based on a one-day snapshot of Tether’s accounts, with no guarantees of what those accounts looked like the day before or the day after.
Ardoino has claimed on multiple occasions that none of the so-called ‘big four’ accounting firms wants anything to do with Tether for reputational reasons. However, he never explained why these four companies were the only ones capable of looking at Tether’s books.
On March 21, Ardoino told Reuters that Tether was “engaging with a Big Four accounting firm,” although he declined to specify the name of the firm or what stage these ‘engagements’ might be at. Tether recently hired a new CFO (Simon McWilliams) to take “a historic step toward a full financial audit,” which Ardoino now says is “a top priority” for the firm.
With respect, ‘engaging with’ is typical Tether. Sounds great, means nothing. Does booking a meeting and then refusing to answer any questions count? What about parking outside an auditor’s office and honking the horn? Or standing outside the auditor’s window late one night holding a boombox over one’s head blasting Peter Gabriel’s In Your Eyes?
Hiring an auditor is a straight-up affair for a normal company with nothing to hide. Here are our books; let us know if you have any questions. The fact that this is proving such a Herculean labor strongly suggests that Tether’s ‘books’ are a collection of indecipherable scribbles on cocktail napkins. If that.
Watch: Chronicle Upgrade, Teranode, and Bitcoin Stewardship
CoinGeek – Read More