China Busts 12 in Illegal Tobacco Ring Using Tether

In the early hours of New Year's Day 2025, authorities in Liuzhou, Guangxi, China, successfully dismantled a criminal network involved in illicit tobacco transactions facilitated through the virtual currency Tether (USDT). This operation, codenamed "1•01," marked a significant milestone in the region's efforts to combat novel covert tobacco-related crimes and highlighted the growing use of virtual currencies in illegal activities.

The investigation began on September 28, 2024, when the Tobacco Joint Operations Data Center in Liuzhou detected suspicious virtual currency transactions on an illegal website. The Liuzhou Public Security Bureau swiftly formed a task force in collaboration with relevant public security departments to delve deeper into the case. Utilizing advanced blockchain smart node resolution technology, the task force analyzed 2 billion "Tether" transactions on the Tron chain and 220 million wallet addresses, creating a comprehensive data lake to guide their investigation.

By monitoring the implicated wallet addresses, the task force identified abnormal fund movements exceeding 30,000 "Tether," equivalent to approximately RMB 217,000. This led to the discovery of 7 related wallets and the identification of key transaction hashes linked to 2 overseas exchanges. The task force then focused on cleansing, denoising, and normalizing the virtual currency exchange data to link anonymous addresses to real individuals, ultimately uncovering the core account of the illegal operation.

On November 30, 2024, the task force uncovered the full scope of the criminal network, which consisted of 12 individuals, including Wu and Qin. The gang operated through an "online matching—virtual settlement—logistics distribution" model, creating a covert tobacco-related crime chain. On January 1, 2025, the task force arrested 12 local suspects in Liuzhou, seizing 84,400 illegal cigarettes with a transaction volume involving 28,625 "Tether." During the interrogation, suspect Huang expressed remorse, stating, "I thought using virtual currency would cover my tracks, never expected to be exposed so quickly."

This operation underscores the increasing sophistication of criminal networks using virtual currencies for illicit activities and the need for advanced technological solutions to combat such crimes. The successful dismantling of this network serves as a significant case in the fight against virtual currency-related illicit tobacco transactions, demonstrating the effectiveness of big data and blockchain technology in law enforcement efforts.