Stablecoin issuer Tether has decided to “voluntarily freeze” 225 million in $USDT found to be connected to an international crime syndicate.
This was uncovered by the US Department of Justice (DOJ) in its investigation into the international human-trafficking group in Southeast Asia.
By freezing a wallet, Tether restricted the “send USDT” function of that wallet. This means that the owner cannot transfer funds until the freeze is lifted.
To achieve the same, Tether collaborated with Web3 technology company OKX in a joint venture. Tools from blockchain analysis firm Chainalysis were also used in the investigation.
The frozen tokens are a part of the external self-custodied wallets linked to an international syndicate responsible for a global “pig butchering” romance scam, said the official press release. As per the Federal Bureau of Investigation (FBI), these kinds of scams cost US citizens $3.3billion last year.
Tether called the development the largest-ever freeze of $USDT in history. As per on-chain data, these funds were located across 37 wallets, with the majority of those tokens previously being transferred to OKX.
In this months-long investigative effort, the location of the illicit funds were found out by analysing the flow of those funds through the blockchain. It then prompted the initiation of a freeze request by the United States Secret Service and a voluntary freeze by Tether.
The announcement also noted that these frozen wallets are on the secondary market and therefore not associated with Tether’s customers. However, to some extent lawful wallets were also captured in this operation. Tether has assured that it will work quickly with law enforcement and the owners of those wallets to unfreeze them, as appropriate.
Talking about how this has set a precedent for the industry, the CEO of Tether, Paolo Ardoino said: “Through proactive engagement with global law enforcement agencies and our commitment to transparency, Tether aims to set a new standard for safety within the crypto space.
“Our recent collaboration with the Department of Justice underscores our dedication to fostering a secure environment. We believe in leveraging technology and relationships, such as our collaboration with OKX, to proactively address illicit activities and uphold the highest standards of integrity in the industry.”
The chief innovation officer of OKX, Jason Lau, on the other hand, reiterated how collaborating with industry stakeholders, including law enforcement agencies, continues to remain “a key tenet of our approach to building trust and serving the public good as a leader in the crypto industry”.
This is not the first time that Tether took action against illicit activities. Back in October, it froze funds located in 32 cryptocurrency addresses linked to terrorism and warfare in Israel and Ukraine. The combined value frozen equated to $873,118.
In the latest press release. Tether also assured its customers of its dedicated efforts to maintain industry integrity and thereby following stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols, in line with the Bank Secrecy Act.
Additionally, Tether’s compliance team also conducts thorough enhanced due diligence screenings for all applicants, cross-referencing them against the sanctions databases of the US Department of the Treasury’s Office of Foreign Assets Control (OFAC). By doing this, the stable coin issuer manages to avoid engaging with sanctioned individuals, entities, or deposit addresses.
