Behind the virtual currency money laundering case for school students: Southeast Asian fraud industry is penetrating Hong Kong

As a world-renowned free port and international financial center, Hong Kong has already emerged a prosperous crypto-economic ecosystem several years before the official preferential policies were introduced. Among them, virtual asset over-the-counter trading service providers (VAOTC) that conduct business in offline stores, network groups, etc. is particularly featured, and together with local native and overseas virtual asset trading service providers (VATPs), it provides token exchange and deposit and withdrawal services for Hong Kong virtual asset investors.

However, due to its highly anonymous and borderless nature of virtual assets, virtual assets based on blockchain technology have led to various types of cryptocurrencies related to criminal activities, especially stablecoins, that can flow into the Hong Kong crypto ecosystem without barriers, causing capital pollution to the business addresses of local operators and ordinary investors, and bringing legal and compliance risks.

This article aims to take the recent money laundering incidents of mainland college students going to Hong Kong as the starting point of analysis, explore the Southeast Asian fraud industry's damage to Hong Kong's crypto economy in this incident, and disclose relevant data.

Event description

202 5 On March 26, 2018, a mainland college student received a part-time job on an idle second-hand item trading platform and was asked to go to Hong Kong to purchase a certain amount of Tether ( USDT ) through a local store changer and transfer it to the designated blockchain address. The errand run process is to use a personal bank card to collect RMB, and after receiving Hong Kong dollars in exchange for Hong Kong dollars from the local fiat currency exchange store, it will go to the designated cryptocurrency exchange store to purchase USDT and ask the store to transfer it directly to the designated wallet.

After the student purchased USDT worth tens of thousands of yuan in this way, his bank card and WeChat payment were frozen by mainland law enforcement agencies and told that the funds collected were transferred out by the victim in the upstream fraud incident.

After investigation by Bitrace and Mankun Law Firm, it was found that this is a typical "blocking back U" money laundering method, which is closely related to the organized crime network in Southeast Asia.

On-chain analysis

A fund analysis of the designated U-received address TTb8Fk found that the student purchased 2,396 USDT from the designated store exchange. The funds then flowed into the guarantee platform merchant address TKN5Vg, which has long been related to the two Southeast Asia companies HuioneGuarantee and NewcoinGuarantee.

These two guarantee platforms have long provided services to organized criminal industries in Southeast Asia, including illegal online gambling, black and gray industries, money laundering, fraud, etc., and in this incident, they assumed the role of helping deal with upstream fraudulent funds.

It shows that this is a vicious incident in which Southeast Asian fraud groups used Hong Kong cryptocurrency to find stores to clean up funds .

Its model is the common "Crypto-based money laundering" method, which means that after money launderers collect fiat currency stolen money from fraud victims, they will quickly go to the over-the-counter trading market to exchange it for USDT, and then return it to the fraudster's blockchain address and obtain commissions from it. Since buying USDT requires more bank cards and real-name information, money launderers will recruit a large number of part-time workers in advance to form a "Crypto Laundering Syndicate", and these part-time workers are called "Carnons" or "drivers".

In this incident, mainland students became money launderers without their knowledge and helped money launderers complete the conversion of funds with Hong Kong VAOTC. The obtained USDT is first entered into the fleet address. After deducting commissions (the calculated rebate ratio is 33%), the team then transfers the funds to the guarantee merchant, and finally settles the funds through the guarantee platform.

Crime industrialization

Bitrace further expanded the rebate address of the money laundering fleet, TGeZzC, and found that this money laundering incident was not an isolated case, but the tip of the iceberg of a large-scale money laundering gang that was highly industrialized.

To trace the source of funds for the rebate address, you can find 7 other first-level U-return addresses (third from left). These addresses are located at the same level as TTb8Fk. They all charge USDT of varying amounts from Hong Kong stores (one left and two left, HKVAOTC). Among them, 33% are transferred to the rebate address (marked red), and 67% are transferred to the second-level U-return address (second from right), and each is dumped through the guarantee platform after being dumped. The entire process has very clear division of labor characteristics.

Analysis shows that these addresses were active since 2024. The initial source of funds had nothing to do with Hong Kong, but a large number of Southeast Asian black and gray industry risk addresses, which further shows that behind the case is a gang closely related to the Southeast Asian organized crime network .

In less than three months, this money laundering fleet alone has illegally cleaned more than US$310,000 in Hong Kong through the same method. Considering that other addresses in this case have not been expanded or other gang addresses have not been detected, the actual scale of such industrial money laundering activities that illegally use HKVAOTC may be even larger.

Hong Kong VAOTC Industry on the Eve of Dawn

Lawyer Shao Shiwei from Shanghai Mankun Law Firm said that on a global scale, the current regulatory framework for OTC businesses in various countries and regions has not yet reached a complete unification. However, major OTC operations such as Hong Kong, the EU, and the United States have begun to formulate relevant bills and license management regulations.

Taking Hong Kong as an example, the Financial Services and Treasury Bureau (FSTB) issued a legislative consultation document on virtual asset over-the-counter trading (OTC) services in February 2024. An important suggestion was made in the document, which was to introduce the licensing system of OTC merchants with the help of the Anti-Money Laundering and Terrorist Funding Ordinance (AMLO). According to this proposal, Hong Kong plans to establish a license management system for OTC merchants through the Anti-Money Laundering and Terrorist Funding Ordinance (AMLO). The core purpose is to ensure that these companies can meet compliance requirements such as Anti-Money Laundering (AML) and Customer Identity Verification (KYC).

This means that all companies that carry out virtual asset over-the-counter trading services, including over-the-counter traders, must apply for corresponding licenses from the Hong Kong Customs (CCE) and strictly abide by relevant laws and regulations. However, as of now, the legislation is still in the consulting stage, and the specific implementation details and the time of entry into force are still to be officially announced by the government.

Industrial operators need to actively respond to supervision

The current VAOTC has become an indispensable part of the cryptocurrency market and plays an extremely critical role in market stability and industry development. With Hong Kong about to introduce OTC compliance policies, operators in the industry must cater to regulatory requirements with a more proactive attitude.

Operators in the industry not only need to strictly abide by the upcoming license system, but also establish and improve an internal compliance system to ensure that all transaction activities can meet compliance requirements in anti-money laundering ( AML ) and customer identity verification (KYC).

At the same time, operators should further strengthen communication with regulatory agencies, actively understand the latest policy trends, and actively participate in industry self-regulatory organizations, and contribute their own strength to promoting the standardized development of the entire industry.

In this process, industry operators need to pay special attention to refusing to associate with any crypto funds involved in illegal activities. Identify and resist funding flows with suspicious signs and avoid any facilitation of illegal activities by implementing strict customer due diligence and transaction monitoring.

This not only helps to maintain the company's own good reputation, but also is an important manifestation of the company's fulfillment of social responsibilities.

Overall, Hong Kong's upcoming OTC compliance policy is an important opportunity for the virtual asset over-the-counter trading industry to achieve standardized development. Operators in the industry should firmly seize this opportunity, actively adapt to changes in the regulatory environment, continuously improve their compliance level, and thus enhance their competitiveness. Only in this way can we be invincible in Hong Kong, a market with a prosperous crypto economy, and achieve long-term and stable development.