Shanghai Court Uncovers $905 Million USDT Exchange Scheme

The event emphasizes the Chinese government’s intensified crackdown on illicit forex operations involving cryptocurrencies, affecting market regulatory dynamics.

The Shanghai Pudong New Area People’s Court announced the discovery of a $905 million USDT exchange scheme involving shell companies. The operation was led by two main figures, Yang and Xu, who developed a system using Tether. Yang managed overseas clients, while Xu was responsible for handling domestic shell company accounts in China.

This illegal operation utilized USDT’s stable price to transfer currency cross-border, avoiding China’s strict regulations.

The scheme operated through parallel forex transactions, where domestic clients deposited RMB, exchanged for corresponding USDT, then transferred abroad. No significant impact on USDT’s price or other cryptocurrencies was reported. Tether was the central medium used exclusively in this scandal.

Financial implications suggest heightened regulatory focus, possibly influencing future offshore stablecoin flows. Expert analysis highlights regulatory gaps and challenges in monitoring cross-border transactions involving stablecoins. Historical trends reveal similar occurrences across China, reinforcing the continued regulatory oversight on shadow finance systems.

Comments on Regulatory Evasion

“This illegal exchange mechanism splits what should be a single, regulated forex transaction into two separate operations, thereby evading regulatory oversight” – source

Gao Yongfeng, Senior Partner at Shanghai Jinli Law Firm, commented on the issue.