$100mn in crypto payments traced to Myanmar-based ‘scammers’

A single company operating from a compound in Myanmar has swindled over $100mn from victims in less than two years, according to analysis by blockchain analytics firm Chainalysis and US anti-slavery group International Justice Mission.

Chainalysis said it had tracked digital coins issued by Tether, one of the world’s largest cryptocurrency platforms, that were used in so-called “pig butchering” scams in which false romantic relationships are engineered in order to gain a victim’s trust.

It said Tether tokens had also been used to make payments to a company based in a compound known as KK Park in eastern Myanmar from the families of trafficked workers that it said had been forced to pay ransoms for their release.

“Everyone has known for a long time that these kinds of scams are blockchain-based, but this is the first time we’ve been able to tie it to a specific location and a known compound,” said Eric Heintz, global analyst at International Justice Mission.

The analysis found that the single Chinese company was able to pull over $100mn in cryptocurrency into just two digital wallets, a scale that Jackie Koven, head of cyber threat intelligence at Chainalysis, said showed the extent to which bad actors were using digital assets to fuel a burgeoning black market.

Tether’s eponymous tokens are designed to track the US dollar and have previously been used by criminal groups as a cross-border payment tool. 

“This case is so illustrative of what’s happening, it’s just a vignette of what’s taking place on a [larger] scale,” said Koven. “Once criminals realised it was traceable we thought they would stop using it, but they didn’t.” 

Chainalysis and IJM declined to identify the Chinese company in order to protect workers there who were victims of human trafficking. Heintz said former workers involved in pig-butchering scams had provided IJM with information regarding the two crypto wallets used by the company to receive illicit funds.

IJM said KK Park, which is located near Myanmar’s border with Thailand, was likely to be home to thousands of trafficked workers, many forced to operate online scams. “It’s a self-contained city,” Heintz said.

The ownership of KK Park is unclear and its operators could not be reached for comment. The Karen National Union, an ethnic armed group present in the territory where KK Park is located, and Myanmar’s military government did not respond to requests for comment.

The findings on KK Park are likely to increase pressure on Tether, which manages almost $100bn in assets, to crack down on use of the company’s in-house currency for illicit purposes. 

The UN’s office on drugs and crime warned last month that Tether had emerged as one of the leading payment methods for money launderers and fraudsters in south-east Asia. The company’s token offers high-speed, irreversible transactions that are an attractive proposition to those seeking to scam victims. 

Tether said it was working with authorities around the world to prevent the illicit use of its token and had frozen $276mn used in pig butchering-related scams. The platform added that it was “proud of its ongoing co-ordination with law enforcement”.

According to data provider CCData, Tether has blacklisted almost 1,300 crypto wallets, with numbers surging since November when the company gave access to its platform to US authorities including the FBI.

Most of the $100mn-worth of crypto tracked to the company in KK Park was traded on the Tron blockchain, a network that has grown into one of the largest in the industry and which promises cheap transaction fees.  

“We’re seeing lots of these scams leverage Tether and Tron. The price stability of Tether is an attractive medium, as well as the low transaction fees for Tron,” Koven said.

Earlier this week, Tether rival Circle — which issues the second-largest dollar-pegged token on the market — announced it would stop support for its own coin on the Tron blockchain. 

Over half of Tether tokens in circulation are traded on Tron, according to the platform’s website. “Most of the people don’t have time to waste, they want something that works,” Paolo Ardoino, Tether’s chief executive, said of the Tron network when he appeared on an industry podcast last year.

Tron network founder Justin Sun was charged by US regulators in March last year with the alleged unregistered sale of securities and market manipulation, a complaint he said “lacks merit”.

While pig butchering scams do not exclusively use crypto for payments, the speed and complexity of transactions on the blockchain make them more challenging for law-enforcement agencies.

Koven said the fact that bad actors were using Tether and Tron, which can often be tracked on a public ledger, provided law enforcement with an opportunity to disrupt illegal activity, but this would require global co-ordination.

“This case illuminates how we can quantify the scale of the problem, identify other scams in the broader network and discover more victims,” she said.