The media called Tether the "currency of dreams" for money launderers

The founders of Tether may have created USDT as a tool for financial inclusivity and an entry point into the crypto market, but ultimately the stablecoin has taken money out of control. This is reported by The Economist.

The detention in November 2021 of a courier transporting £250,000 by British police allowed for the uncovering of a large-scale money laundering scheme. Its organizer turned out to be Ekaterina Zhdanova from the Russian Federation.

During an international investigation by law enforcement agencies from Europe, the Middle East, and the USA called Operation Destabilise, it was revealed that the infrastructure base for Zhdanova's operations was a coin from Tether. The entrepreneur received cryptocurrency by helping ransomware operators cash out their earnings.

The businesswomen's team across Western Europe was collecting cash from criminals obtained from the sale of drugs and other illegal goods. In the UK alone, this amount reached £12 million for the years 2022-2023.

Then couriers delivered money to Russian oligarchs, intelligence representatives, propaganda agencies, and expats who lost the ability to use traditional financial channels due to sanctions. Recipients paid Zhdanova from their bank accounts in the Russian Federation.

The entrepreneur was paying off debts to clients through transactions in USDT. The stablecoin allowed for virtually instant transfers of any amounts between digital wallets with low fees and without oversight from regulatory bodies.

"Individually, we were aware of many elements of this money laundering activity. But I believe that Operation Destabilise brings everything together, and you can understand how this global system works. And this is new to us, actually," commented William Lyon, head of cyber intelligence at the National Crime Agency.

According to law enforcement, the effectiveness of USDT made the use of the scheme very cheap. While traditional money launderers charge a fee of at least 10% of the amount, Zhdanova charged less than 3%.

Tether's cooperation with law enforcement deemed "strange"

In January 2024, UN experts noted that stablecoins had become one of the tools used by fraudsters and money laundering individuals.

In October, The Wall Street Journal reported on the investigation by U.S. authorities regarding Tether for possible violations of sanctions and AML regulations. The company's CEO, Paolo Ardoino, denied the information from the publication.

Tether has repeatedly emphasized its cooperation with law enforcement from various jurisdictions. The company regularly blocks assets suspected of illegal activity. According to the statement, the volume of frozen funds has already reached $2.5 billion.

In 2024, Tether partnered with the security firm Chainalysis to create a monitoring system for activity in the secondary USDT market.

Together with Tron and TRM, the stablecoin issuer has formed a "financial crimes unit" — T3. Speaking about the results of the unit's work, Ardoino reported that its team of "20 or 30" employees has frozen USDT worth tens of millions of dollars at the request of law enforcement.

However, traditional financial institutions have compliance operations of disproportionate scale, noted The Economist. In a large bank like HSBC, thousands of employees are engaged in such departments. Tether attracts up to 40 million new clients quarterly, and the 20-30 specialists at T3 do not have the physical capacity to verify the integrity of each one, the journalists emphasized. Given the speed of blockchain transactions, all that the team can realistically do in the event of an investigation is to retrospectively outline the exact movement of funds, they are confident.

The Economist also found the company's approach to cooperation with the authorities "strange." According to Ardoino, requests from the United States are a priority, while inquiries from "tyrannical countries" are generally ignored.

"But financial institutions should not have the ability to choose which countries to assist with information. If they operate in a territory, they are subject to the rules in effect there," the publication believes.

The problem for the authorities is that Tether, headquartered in El Salvador, effectively operates in a "supranational cloud" and it is difficult to compel the company to provide data. The management of the issuer usually reacts very painfully to criticism regarding the use of USDT in illegal schemes, and law enforcement agencies avoid this topic for fear of ending cooperation.

"Stablecoins are a money launderer's dream. But we don't want to talk about it publicly to avoid damaging our relationship with Tether," confirmed a representative of one of the agencies.

Let us remind you that in May, the New York prosecutor's office filed charges of laundering funds obtained from drug trafficking through USDT against the heir of the Cartier jewelry house and five Colombian citizens.