A company operating out of a compound in Myanmar defrauded victims of more than $100 million in less than two years, according to an analysis by blockchain analysis firm Chainalysis and US anti-slavery group International Justice Mission.
Chainalysis announced that it has tracked digital coins issued by Tether, one of the world’s largest cryptocurrency platforms. These coins were used in so-called “pig-butchering” scams, in which victims set up fake romantic relationships in order to gain their trust.
Tether tokens were also used to make payments from families of trafficked workers who were forced to pay ransoms for their release to companies based at a compound known as KK Park in eastern Myanmar, the statement said.
Eric Heinz, Global Analyst at International, said: “We’ve known for a long time that this type of fraud is blockchain-based, but this is the first time we’ve been able to link it to a specific location or known chemical compound. ” he said. mission of justice.
Analysis revealed that this single Chinese company was able to withdraw over $100 million in cryptocurrencies to just two digital wallets. This scale shows how bad actors are using digital assets, said Jackie Corben, head of cyber threat intelligence at Chainalysis. Fueling a burgeoning black market.
Tether’s eponymous token is designed to track US dollars and was previously used by criminal groups as a cross-border payment tool.
“This incident is very indicative of what’s going on, but it’s just a small part of what’s going on on a (bigger) scale,” Corben said. “Once criminals realized it was traceable, we thought they would stop using it, but they haven’t.”
Chainalysis and IJM declined to identify the Chinese companies to protect Chinese workers who are victims of human trafficking. Heinz said a former employee involved in the pig slaughter scam provided IJM with information about two cryptocurrency wallets the company used to receive illegal funds.
IJM said KK Park, near the Myanmar-Thailand border, is likely home to thousands of trafficked workers, many of whom are forced into online fraud. “This is a self-contained city,” Heinz said.
The ownership of KK Park is unknown, and the operator could not be reached for comment. The Karen National Union, an ethnic armed group in the area where KK Park is located, and Myanmar’s military government did not respond to requests for comment.
The findings regarding KK Park could increase pressure on Tether, which manages about $100 billion in assets, to crack down on the use of its internal currency for illicit purposes.
Last month, the United Nations Office on Drugs and Crime warned that Tether was emerging as one of the main payment methods for money launderers and fraudsters in Southeast Asia. The company’s tokens offer fast and irreversible transactions, making them an attractive proposition for those looking to defraud their victims.
Tether said it is working with authorities around the world to prevent fraudulent use of its tokens and has frozen $276 million in pig slaughter-related fraud. The platform added: “We are proud of our continued collaboration with law enforcement.”
Tether has blacklisted about 1,300 crypto wallets, according to data provider CCData, a number that has skyrocketed since November, when the company granted U.S. authorities, including the FBI, access to its platform. .
Most of the $100 million worth of cryptocurrencies tracked by KK Park’s company were traded on the Tron blockchain, a network that has grown to be the largest in the industry and promises low transaction fees.
“We’re seeing a lot of these scams using Tether and Tron. Tether’s price stability makes it an attractive medium and Tron’s low transaction fees,” Corben said.
Earlier this week, Tether rival Circle, which issues the second-largest dollar-pegged token on the market, announced it would stop supporting its coins on the Tron blockchain.
More than half of the Tether tokens in circulation are traded on Tron, according to the platform’s website. “Most people don’t have time to waste and want something to work,” Tether CEO Paolo Ardoino said of the Tron network during an appearance on an industry podcast last year.
Tron Network founder Justin Sun was indicted by US regulators in March last year on charges of unregistered sale of securities and market manipulation, but said the charges were “without merit.”
While pig butchering scams do not exclusively use cryptocurrencies for payment, the speed and complexity of transactions on blockchain make them more difficult for law enforcement.
Corben said the fact that bad actors were using Tether and Tron, which can often be tracked on public ledgers, gave law enforcement an opportunity to stop illegal activity, but this required global coordination. He said it would be necessary.
“This case quantifies the scale of the problem and reveals how we can identify other scams within the broader network and uncover more victims,” she said.
