Shanghai Court Uncovers 6.5 Billion RMB Illegal Foreign Exchange Case Involving USDT

In a significant development, the People's Court of Pudong New Area, Shanghai, China, has exposed a major case involving illegal foreign exchange transactions totaling 6.5 billion RMB. The case centers around the use of a stablecoin, specifically USDT, as a medium for facilitating cross-border fund transfers. The suspects, Yang and Xu, along with others, utilized domestic shell companies' accounts to provide stablecoins to overseas accounts of unspecified clients, thereby generating profits through illegal foreign exchange activities.

Over the past three years, the suspects have been involved in illegal foreign exchange transactions amounting to 6.5 billion RMB. Yang, who was based overseas, was responsible for attracting clients and managing foreign exchange funds. Xu, based domestically, managed the corporate accounts of 17 shell companies, with daily fund flows exceeding tens of millions RMB. This clear division of labor and close cooperation between the suspects highlight the organized nature of their operations.

The case details reveal that by the end of 2023, a Shanghai resident, Ms. Chen, needed to remit money to her daughter overseas. Due to foreign exchange restrictions, she eventually contacted an overseas "exchange company," which was actually a domestic shell company controlled by Yang and others. Following the instructions, Ms. Chen transferred RMB into the company's account. Subsequently, her daughter's overseas account received an equivalent amount of foreign exchange, with the "exchange company" deducting a certain percentage as a fee. This modus operandi has been used by the criminal group for an extended period, operating under the guise of "third-party collection and payment" to provide illegal exchange services through cross-border matching transactions.

This case underscores the complexities and challenges associated with regulating cryptocurrencies and stablecoins, particularly in the context of illegal foreign exchange activities. The use of stablecoins as a medium for cross-border transactions highlights the need for enhanced regulatory frameworks and surveillance mechanisms to prevent such illegal activities. The case also serves as a reminder of the potential risks and vulnerabilities associated with the use of digital currencies in financial transactions.