Fraudulent activities: Cryptocurrency Tether increasingly misused for money laundering

The cryptocurrency Tether (USDT) is increasingly being used for fraudulent activities and money laundering, according to a report by the Financial Times. The United Nations has already published a report highlighting this development. Criminals use Tether to make monetary transactions that cannot be reversed and to move illicit funds.

The use of Tether has increased in fraudulent romances and illegal online gambling platforms. Specific cases in which Tether was related to money laundering have already been uncovered by the authorities and countermeasures have been taken to curb the illegal use of the token. The fast and irreversible transactions on the blockchain make Tether particularly attractive for criminal activities. As a stablecoin, Tether is also an attractive way to exchange between different cryptocurrencies without risking loss of value due to price fluctuations.

Irreversible transactions on the blockchain

Two specific cases are cited as examples: In August 2023, Singaporean authorities seized cash and cryptocurrencies worth $737 million from a money laundering network that was responsible for moving illegal USDT, according to the Financial Times.

About three months later, after a joint investigation with US authorities and the crypto exchange OKX, Tether Limited froze around 225 million USDT tokens, which were probably connected to a human trafficking syndicate in Southeast Asia.

The reason for using Tether is the fact that the cryptocurrency allows fast and irreversible transactions on the blockchain."Once the money is transferred, it is transferred. You can't withdraw it"said Erin West, a California-based prosecutor and cybercrime expert.

USDT as a medium of exchange for other cryptocurrencies

Tether is a so-called stablecoin, i.e. a cryptocurrency that follows the rate of a regular currency. Stablecoins are usually purchased in order to later exchange them for other cryptocurrencies such as Bitcoin or Ethereum, which are usually subject to massive price fluctuations. In the case of Tether, the digital coins are pegged to the value of the US dollar. The Tether token, known by the abbreviation USDT, should always be worth as much as possible one US dollar.

In November last year, the stablecoin provider Tether announced that it would work with US authorities to combat the illegal use of its token. According to CCData analysts, the number of crypto wallets blacklisted by the provider has since increased by around 27 percent.