Hong Kong, as a world-renowned free port and international financial center, has seen a prosperous crypto-economic ecosystem emerge even before official preferential policies were introduced. Among them, virtual asset over-the-counter (VAOTC) trading service providers, which operate through offline stores and online groups, are particularly distinctive, providing token exchange and deposit/withdrawal services for Hong Kong virtual asset investors alongside local and overseas virtual asset trading service providers (VATP).
However, virtual assets based on blockchain technology, due to their high anonymity and borderless nature, allow various cryptocurrencies associated with criminal activities—especially stablecoins—to flow unobstructed into Hong Kong's crypto ecosystem, contaminating the business addresses of local operators and ordinary investors, bringing legal and compliance risks.
This article aims to analyze the recent money laundering incident involving mainland university students in Hong Kong, exploring the damage caused by the Southeast Asian fraud industry to the Hong Kong crypto economy in this incident and disclosing relevant data.
Incident Description
On March 26, 2025, a mainland university student received a part-time job on a second-hand trading platform, being asked to go to Hong Kong to purchase a certain amount of Tether (USDT) through local exchange shops and transfer it to a specified blockchain address. The process involved using a personal bank card to collect RMB, exchanging it for HKD in a local currency exchange shop, and then going to the specified cryptocurrency exchange shop to buy USDT and have the shop directly transfer it to the designated wallet.
After purchasing USDT worth tens of thousands of RMB through this method, the student's bank card and WeChat Pay were frozen by mainland law enforcement agencies, which informed them that the funds received were transferred from the victims of upstream fraud incidents.
Afterwards, Bitrace and Mankun Law Firm's investigation revealed that this was a typical 'card-to-crypto' money laundering technique, closely related to organized crime networks in Southeast Asia.
On-Chain Analysis
An analysis of the specified USDT address TTb8Fk shows that the student purchased 2,396 USDT from the designated exchange shop, which then flowed into the address of the guarantee platform merchant TKN5Vg, which has long-standing business associations with Huione Guarantee and Newcoin Guarantee in Southeast Asia.
These two guarantee platforms have long provided services for organized crime industries in Southeast Asia, including illegal online gambling, gray and black markets, money laundering, and fraud, and in this incident, they played a role in helping process upstream fraudulent funds.
This indicates a malicious incident in which a Southeast Asian fraud group utilized cryptocurrency exchange shops in Hong Kong for money laundering.
Its model is a common 'card-to-crypto' (Crypto-based money laundering) technique, meaning that money launderers quickly exchange cash obtained from fraud victims into USDT in the OTC market before transferring it back to the blockchain address of the fraudsters, from which they earn a commission. Since purchasing USDT requires a lot of bank cards and real-name information, money launderers will recruit a large number of part-time workers to form a 'money laundering fleet' (Crypto Laundering Syndicate), and these part-time workers are referred to as 'card farmers' or 'runners.'
In this incident, the mainland student unknowingly became a money laundering runner, assisting money launderers in completing the conversion of funds together with Hong Kong VAOTC. The USDT obtained first entered the fleet address, which, after deducting commissions (calculated at a rebate ratio of 33%), transferred the funds to the guarantee merchant and ultimately settled the funds through the guarantee platform.
Criminal Industrialization
Bitrace further expanded the rebate address TGeZzC of the money laundering fleet, discovering that this money laundering incident is not an isolated case, but rather the tip of a highly industrialized large money laundering gang.
Tracing the source of funds for the rebate address reveals seven other primary card-to-crypto addresses (left three), which are at the same level as TTb8Fk, all receiving varying amounts of USDT from Hong Kong exchange shops (left one and two, HKVAOTC), of which 33% is transferred to the rebate address (marked in red), and 67% is transferred to secondary card-to-crypto addresses (right two) before being sold off through guarantee platforms, with the entire process exhibiting very clear characteristics of division of labor.
Analysis shows that this batch of addresses began to be active from 2024, with the initial source of funds unrelated to Hong Kong, but rather from numerous high-risk addresses in Southeast Asia, further indicating that the case is closely related to an organized crime network in Southeast Asia.
In less than three months, this one money laundering fleet has illegally laundered over 310,000 USD in Hong Kong using the same method. Considering that there are still other addresses in this case that have not been expanded or other gang addresses that have not been detected, the actual scale of this industrialized money laundering activity illegally utilizing HKVAOTC may be even larger.
Hong Kong VAOTC Industry on the Eve of Dawn
Lawyer Shao Shiwei from Shanghai Mankun Law Firm stated that globally, the current regulatory frameworks for OTC traders in various countries and regions have not yet reached full uniformity. However, places like Hong Kong, the European Union, and the United States, which are major operational locations for OTC, have already begun drafting relevant laws and licensing management regulations.
Taking Hong Kong as an example, the Financial Services and Treasury Bureau (FSTB) released a legislative consultation document regarding virtual asset over-the-counter (OTC) services in February 2024. The document proposed an important suggestion, which is to introduce a licensing system for OTC traders through the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). According to this proposal, Hong Kong plans to establish a licensing management system for OTC traders through the AMLO, with the core purpose of ensuring that these companies can meet compliance requirements for anti-money laundering (AML) and customer identity verification (KYC).
This means that all companies providing virtual asset over-the-counter trading services, including OTC traders, must apply to the Hong Kong Customs (CCE) for the corresponding licenses and strictly comply with relevant laws and regulations. However, as of now, this legislation is still in the consultation phase, and specific implementation details and effective dates await formal government announcement.
Industry operators need to actively respond to regulations.
Currently, VAOTC has become an indispensable part of the cryptocurrency market, playing a crucial role in market stability and industry development. As Hong Kong is about to introduce OTC compliance policies, industry operators must adopt a more proactive attitude to meet regulatory requirements.
Operators within the industry not only need to strictly comply with the upcoming licensing system but also establish and improve their internal compliance systems to ensure that all trading activities meet the compliance requirements for anti-money laundering (AML) and customer identity verification (KYC).
Additionally, operators should further strengthen communication and exchanges with regulatory agencies, proactively understand the latest policy dynamics, and actively participate in industry self-regulatory organizations to contribute to the standardized development of the entire industry.
In this process, industry operators need to pay special attention to rejecting any association with cryptocurrency funds involved in illegal activities. By implementing strict customer due diligence and transaction monitoring measures, they can identify and resist those funds that show suspicious signs, avoiding any facilitation of illegal activities.
This not only helps maintain the company's good reputation but also serves as an important manifestation of the company's social responsibility.
Overall, the upcoming OTC compliance policies in Hong Kong represent an important opportunity for the virtual asset over-the-counter trading industry to achieve standardized development. Operators within the industry should seize this opportunity, proactively adapt to changes in the regulatory environment, and continuously enhance their compliance levels to strengthen their competitiveness. Only in this way can they maintain a foothold in the prosperous cryptocurrency market of Hong Kong and achieve long-term stable development.