Money Laundering of 166 million USD in Crypto Assets! China Sentences Five to Prison Revealing the USDT Dark Side

A court in Beijing sentenced five individuals to prison terms of two to four years on March 21, 2025, for using USDT to conduct money laundering activities involving crypto assets amounting to as much as 166 million USD from January to August 2023. The case was announced on October 28, 2025, during the annual Financial Street Forum, marking one of the most significant prosecutions by China against crypto financial crimes.

Crypto Assets Money Laundering Techniques Revealed: How USDT Becomes a Cross-Border Black Gold Channel

From January to August 2023, the gang meticulously planned a complex cryptocurrency money laundering operation that converted client funds into USDT stablecoins to facilitate illegal cross-border transfers, processing a total of 1.182 billion yuan (approximately 166 million USD) through multiple accounts. The Beijing People's Procuratorate detailed how the gang used virtual currencies as a “bridge” for covert foreign exchange transactions, with individual members handling amounts ranging from 149 million yuan to 469 million yuan.

Lin Jia led this crypto assets money laundering operation under the instructions of unidentified individuals, collaborating with Lin Yi, Xia, Bao, and Chen to transfer client funds through multiple bank accounts registered in their names. The gang exchanged the received RMB payments for USDT through multiple Tether trading platform accounts under their control, then completed cross-border transfers via platform transactions and profited from each exchange.

The core of this money laundering method using crypto assets lies in leveraging the characteristics of USDT. As a stablecoin pegged 1:1 to the US dollar, USDT not only maintains value stability but also possesses the anonymity of crypto assets and the convenience of cross-border transfers. Criminal organizations have recognized this “best of both worlds” characteristic, making it an ideal tool for the cross-border flow of illegal funds.

Traditional illegal foreign exchange trading requires through underground money houses or complicated trade settlements, leaving behind paper records and bank transaction traces. In contrast, using USDT for money laundering with Crypto Assets only leaves transaction hashes on the blockchain, making it difficult to link these transactions to real identities without professional tracking technology. This gang is precisely leveraging this technical threshold to evade regulation.

Blockchain Tracking Technology Cracks the Money Laundering Mystery of Crypto Assets

The prosecution has overcome the inherent challenges of cryptocurrency money laundering investigations by utilizing specialized technical means, combining financial data analysis with blockchain transaction tracking. This is a significant technological breakthrough for Chinese law enforcement agencies in combating cryptocurrency money laundering crimes.

Investigators compared the time correlation between traditional bank accounts and virtual currency trading accounts and found suspicious patterns in the flow of funds, which contradicted the defendant's claim of legitimate “crypto assets speculation.” Specifically, every time a bank account received a RMB deposit, corresponding USDT purchase transactions would occur on the Tether platform within minutes, and the amounts were highly consistent. This high frequency and high precision of time correlation far exceeded normal crypto assets trading behavior.

The prosecution authority remotely reviewed data from overseas platforms to verify evidence collection procedures and ensure compliance with the law during the construction of the case. This “comprehensive coverage” approach addresses the “evidence collection dilemma” in cross-border economic crimes involving funds and personnel across multiple jurisdictions, as mentioned by the prosecutor.

Crypto Assets Money Laundering Investigation Technology Breakthrough:

Time Correlation Analysis: Compare the timestamps of bank transfers and USDT transactions to identify suspicious patterns.

Blockchain Address Tracking: Track the flow and final destination of USDT through on-chain analysis tools.

Multi-Account Association Analysis: Identify multiple seemingly unrelated accounts controlled by the same group.

Cross-border Data Collaboration: Collaborate with overseas trading platforms to obtain KYC data and transaction records.

Cash Flow Reconstruction Technology: Restoring blockchain transactions to a complete capital flow path.

On March 21, 2025, the Haidian District People's Court made a first-instance judgment, and all five defendants accepted the judgment without appeal. The case provided authorities with what they called a “key judicial practice reference” to deal with similar Crypto Assets Money Laundering financial crimes in an increasingly digital world.

The People's Bank of China declares a zero-tolerance policy towards stablecoins

At the same financial street forum where this case of Money Laundering involving crypto assets was announced, Pan Gongsheng, the Governor of the People's Bank of China, issued a stern warning, stating that stablecoins pose a threat to global financial stability and monetary sovereignty. He stated: “Stablecoins, as a form of financial activity, still fail to meet the basic requirements of financial regulation,” pointing out the deficiencies of stablecoins in customer identity verification and anti-Money Laundering compliance.

The central bank governor emphasized that stablecoins “exacerbate the vulnerabilities of the global financial system” and expose loopholes in terrorist financing and Money Laundering with Crypto Assets. Pan Gongsheng confirmed that the People's Bank of China will continue to adopt a zero-tolerance policy towards private digital currencies while closely monitoring the development of the overseas stablecoin market.

As these warnings are issued, the market capitalization of stablecoins has reached approximately 310 billion USD, with Tether and USD Coin accounting for about 84% of the total supply (59% and 25% respectively), processing settlement amounts exceeding 46 trillion USD each year. Such a massive trading scale, combined with a relatively loose regulatory environment, makes stablecoins an ideal tool for Money Laundering in Crypto Assets.

China's hardline stance contrasts sharply with global trends. Jurisdictions such as the United States and the European Union are exploring how to regulate stablecoins rather than imposing an outright ban. However, China views stablecoins as a direct threat to monetary sovereignty, as they effectively create a parallel currency system that is not controlled by central banks.

Ant Jingdong Stablecoin Project Suspended

In mid-October, under the direct instructions of the People's Bank of China and the National Internet Information Office, Ant Group and JD.com halted their plans to issue stablecoins in Hong Kong. Officials told the two companies that the right to issue currency must belong entirely to the state and not to private enterprises. This intervention reversed the previous momentum, as Ant Group had announced in June its plans to apply for stablecoin licenses in Hong Kong, Singapore, and Luxembourg.

Despite facing setbacks, Ant Group has registered trademarks for virtual assets and blockchain technology in Hong Kong, including “ANTCOIN”. At the same time, its Whale blockchain platform processed one-third of global payment transactions last year, valued at over 1 trillion USD. This indicates that Ant Group is still seeking opportunities to develop its blockchain business within a compliant framework.

In August, Chinese regulatory authorities ordered brokerages and research institutions to cease publishing reports or holding seminars promoting stablecoins, citing fraud and speculative risks as reasons. This comprehensive regulatory pressure indicates that the Chinese government appears to be a decisive factor in limiting the proliferation of stablecoins.

At the same time, last month, Hong Kong's stablecoin licensing system attracted 77 letters of intent from banks, technology companies, and Web3 startups. The Hong Kong Monetary Authority held preliminary meetings while warning that only a limited number of licenses would be approved initially. This differentiated regulatory strategy under “one country, two systems” shows that China is experimenting with a more open regulatory framework in Hong Kong while maintaining financial sovereignty.

The judgment of this $166 million Money Laundering case involving crypto assets, in conjunction with the central bank's zero-tolerance policy and the crackdown on tech giants' stablecoin plans, clearly conveys China's regulatory stance: in the digital currency realm, only the central bank digital currency (digital renminbi) is a legal option.