In 2023, Shanghai police uncovered a case of illegal currency exchange using Tether, involving an amount as high as 6.5 billion RMB. Criminal gangs used virtual currency to circumvent foreign exchange controls and transfer funds abroad.
The anonymity, decentralization, and cross-border circulation of virtual currencies make them a 'perfect tool' in the eyes of criminals. From money laundering to fraud, from pyramid schemes to dark web transactions, virtual currencies are becoming a breeding ground for new types of crime. Today, we will reveal: How are virtual currencies used for crime? How can ordinary people avoid becoming victims?
01 Three major types of virtual currency crimes:

(1) Money laundering: The 'invisibility cloak' for dirty money
Modus operandi:
Mixers (Tornado Cash): Mixing illicit funds with other transactions to cut off the tracking of the money chain.
Over-the-counter trading (OTC): Using 'coin dealers' to exchange illicit funds for fiat currency, achieving 'cleaning'.
Typical cases:
In 2022, the North Korean hacker group Lazarus laundered $625 million of stolen cryptocurrency through mixers.
In 2023, the illegal currency exchange case involving 6.5 billion USDT in Shanghai, where criminal gangs used virtual currency to evade foreign exchange regulation.
(2) Fraud: ICOs, Ponzi schemes, and fake exchanges
Common scams:
1. Pig butchering scam: Pretending to be an 'investment mentor', luring victims to recharge on fake platforms.
2. Fake ICOs: Fabricating white papers and running away with the funds after fundraising (e.g., the Confido scam in 2017).
3. Exchange running away: Small platforms suddenly closing after attracting users to deposit coins (e.g., AEX crash in 2022).
Data cases:
In 2023, global losses from cryptocurrency scams exceeded $4 billion.
According to statistics from the Ministry of Public Security, cases involving virtual currency fraud increased by 120% year-on-year in 2023.
(3) Pyramid schemes: Ponzi schemes disguised as 'blockchain'
Operational model:
Packaging grandiose concepts: Such as 'metaverse mining', 'Web 3.0 revolution'.
Promising high returns: Static income + referral rewards.
Collapse and runaway in later stages: When new funds can no longer cover interest, project parties disappear.
Typical cases:
PlusToken (2019): Involved over 50 billion RMB, affecting 2 million victims.
WoToken (2020): Imitated the PlusToken model, defrauding over 1 billion RMB.
02 Why have virtual currencies become accomplices to crime?

Anonymity:
Bitcoin is pseudonymous (transactions can be traced but are difficult to associate with real people). Privacy coins like Monero (XMR) and Zcash (ZEC) are completely anonymous, making law enforcement extremely difficult.
Cross-border liquidity:
Traditional banks require reviews for cross-border transfers, while USDT can arrive in seconds, circumventing foreign exchange controls.
| Regulatory lag:
Policies vary by country, and criminals exploit 'regulatory gaps' (such as some offshore exchanges).
03 How to avoid becoming a victim?
Beware of 'high return' temptations:
All projects that promise 'guaranteed profits' or '30% monthly returns' are 99% scams.
Verify platform qualifications
Check whether the exchange holds a compliant license (such as U.S. MSB, Hong Kong VASP).
Avoid privacy coins and mixers:
Privacy coins like Monero (XMR) are often used for illegal transactions, and ordinary investors should stay away.
Cold storage for large assets:
It is recommended to store large amounts of cryptocurrency in hardware wallets (like Ledger) to avoid the risk of exchanges running away.
04 New tools for global crime fighting:
On-chain tracking technology
Companies like Chainalysis in the U.S. and Okex in China can analyze Bitcoin flows to assist in investigations.
Regulatory upgrades
U.S.: Exchanges are required to report transactions over $10,000 (new rule in 2023).
EU: The MiCA regulation will comprehensively regulate stablecoins and exchanges (to be implemented in 2025).
China: Central Bank Digital Currency (Digital RMB) enables traceable transactions to combat money laundering.
International collaboration
In 2023, the U.S., UK, and Singapore jointly shut down the Bitzlato exchange, accusing it of laundering $700 million.
05 Future outlook: The game of crime and countermeasures:
As regulatory technology improves, anonymous coins and mixers will face greater crackdowns, but criminals may turn to:
1. DeFi anonymous protocols: Using smart contracts for automatic money laundering.
2. Cross-chain bridges: Transferring illicit funds across different blockchains, increasing tracking difficulty.
Reminder to investors:
"Virtual currency crime has formed an industrial chain; ordinary people should be vigilant and not be greedy for small profits."