When "arbitrage in the cryptocurrency sector" evolves from an arbitrage method in cryptocurrency trading to a tool for illegal fund transfers across borders, it ultimately cannot escape legal sanctions. Recently, Shanghai police reported a case involving 6.5 billion yuan in the "underground money exchange" of the cryptocurrency sector, where 17 shell companies conducted "matching" transactions using USDT (Tether), exposing the gray operations of fund transfers to the light.
How can 6.5 billion yuan in funds be "invisibly" transferred across borders?
The operational model of this case can be described as a "textbook example" of illegal fund transfers: suspects Yang and Xu and others controlled 17 domestic shell companies specifically to "serve" individuals or enterprises with large cross-border transfer needs.
The specific process is simple and brutal yet highly concealed: if someone needs to transfer funds overseas (such as exceeding the annual 50,000 USD foreign exchange quota for studying abroad, purchasing property, etc.), they only need to transfer RMB into these shell company accounts. The domestic group then, through overseas affiliates, deposits equivalent USDT or foreign currency into the other party’s overseas account. Throughout the process, the funds do not actually cross borders but complete a closed loop through USDT's "ledger hedging" — receiving RMB domestically, paying cryptocurrency overseas, and charging a 3%-5% commission, with the entire process able to be completed in as little as half an hour.
According to police disclosures, in just three years, this group transferred funds amounting to 6.5 billion yuan through this method, involving various scenarios such as studying abroad, purchasing property, and investments. One woman, surnamed Wang, transferred 500,000 USD through this channel to purchase property for her son abroad, only to realize she had been scammed and called the police when her overseas account had not received the funds due to a break in the funding chain.
Why has USDT become the "new favorite" of underground money exchanges?
In this case, the stablecoin USDT became the core tool of illegal operations, which is not coincidental.
As the world's largest stablecoin by market value, USDT claims to be pegged to the US dollar at a 1:1 ratio, with minimal price fluctuations, and can circulate freely across hundreds of exchanges worldwide. This "dollar-like" property naturally gives it the function of a "cross-border payment medium" — compared to traditional foreign exchange, it does not need to go through the banking settlement system, has fast transfer speeds, low fees, and while transaction records are on-chain, they are difficult to directly associate with individuals, making them far more concealed than cash or bank transfers.
More importantly, Tether, the issuer of USDT, has long been controversial due to "insufficient transparency of reserves," which ironically makes it a "hard currency" in gray areas. Underground money exchanges are particularly attracted to its characteristics of "on-chain circulation + regulatory ambiguity": using USDT to complete fund "matching" can evade foreign exchange controls and obscure the source and destination of funds through the decentralized nature of cryptocurrency.
Similar cases have erupted in multiple regions, with regulators targeting "money laundering in the cryptocurrency sector."
In fact, this case in Shanghai is not an isolated incident. Recently, multiple cases utilizing USDT for fund transfers have been cracked in Beijing, Guangdong, and other regions, with involved amounts ranging from hundreds of millions to billions. The commonality among these cases is the use of cryptocurrency's cross-border liquidity to bypass the quota limitations of the foreign exchange administration and the banks' anti-money laundering reviews, forming an illegal fund channel of "domestic RMB - USDT - overseas foreign currency."
The police pointed out that these operations are essentially typical "underground money exchange" behaviors, violating relevant provisions regarding illegal business operations and money laundering in the Foreign Exchange Management Regulations and the Criminal Law. As the cryptocurrency market develops, illegal actors' methods are also evolving: early on, transactions were mostly completed in cash for "matching," but now they use mixers, anonymous wallets, and other tools to further obscure the fund trails, increasing investigative difficulty.
It is worth noting that regulatory authorities are intensifying their crackdown on illegal financial activities involving cryptocurrencies. Since 2023, the People's Bank of China, the Ministry of Public Security, and other departments have jointly launched a special action to "combat and rectify illegal cross-border financial activities," explicitly listing "using virtual currencies for cross-border fund transfers" as a key target for crackdowns. The recent announcement by Shanghai police regarding the 6.5 billion yuan major case serves as a strong deterrent against such behaviors.
Be cautious! Ordinary people should not touch the red line of "cryptocurrency money laundering."
For ordinary investors, the warning significance of this case is particularly important:
Do not be misled by "high-limit cross-border transfer" services: any channel claiming to "bypass foreign exchange controls" or facilitate "rapid large transfers" is fundamentally illegal. Not only is the security of the funds not guaranteed, but it may also involve legal violations.
Recognize the dual nature of USDT: as a cryptocurrency, USDT's liquidity facilitates normal transactions, but it is also exploited by illegal actors. Ensure that any funds transfer involving USDT has a legal source and compliant purpose to avoid getting entangled in money laundering chains.
Legal cross-border transfers are only possible through formal channels: individuals can process their annual foreign exchange quota of 50,000 USD through banks; amounts exceeding this can be addressed through compliant means such as study abroad proof or overseas investment filing. Do not seek convenience through gray channels.
Cryptocurrency is not a lawless land; when "arbitrage in the cryptocurrency sector" crosses the legal red line, it will ultimately lead to "lifting a stone only to drop it on one’s own foot." This 6.5 billion yuan major case once again proves that regardless of how innovative the technical methods are, illegal fund transfers will eventually be locked down by regulators — maintaining the bottom line of the law is the most effective protection of one’s assets.
