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China Cracks Down on Illegal Crypto-Based Gambling Operations
By Shane Addinall Sep 22, 2020 IndustryChina has once again proven that they are deadly serious about cracking down on illegal gambling. Even using the Tether cryptocurrency could only keep the operation afloat for 15 months before it was shut down.One of the most commonly touted benefits of the Blockchain and resultant cryptocurrencies is its ability to circumvent local legislation and draconic financial controls. In some instances, this superpower has been used for good as we saw in Brazil where locals were able to beat hyperinflation by selling services online and receiving payment via Bitcoin and Ethereum.
However, China has reported on a major illegal gambling operation bust where deposits and withdrawals were being processed via Tether (USDT). According to the Public Security Bureau in Huizhou City, the illegal gambling ring was in operation for 15 months before being shut down.
Convoluted Banking System
Given China’s stringent anti-gambling laws, and severe punishments for transgressions, the illegal operation fell back on a convoluted yet historically effective method of funding player accounts.
In total, it comprised more than 120 gambling sites and made use of approximately 3000 “runners”. These runners each created and funded gambling accounts which resided outside of China’s borders. Would-be gamblers then used these accounts to deposit and withdraw from their online casino of choice.
Players would then order fake products where rather the online service or product on record the funds would be channelled to an online casino site.
Tether Tied to Illegal Processing
This is not a new scheme as post-UIEGA gambling companies targeting the USA would set up banking accounts for book and flower shops to avoid using the digital banking codes associated with online gambling.
To recharge the funds in the runner-created account the player would need to purchase Tether coins. These transactions would be further obfuscated through the use of bank cards or Alipay.
This setup not only flooded funds into the account of the ringleaders but each of the 3000+ runners would receive commissions on the cryptocurrency transactions processed by their respective accounts.
Why Tether and Not Bitcoin?
One question was why use a relatively unknown crypto token like Tether rather than a larger one like Bitcoin, Litecoin or Ethereum? Experts believe that the answer lies in the relative stability of the coin’s controls.
Unlike other digital coins who stand and fall on the power of public opinion alone, Tether follows the ebb and flow of the US dollar. So much so that the virtual coin increases its own supply in concert with the new money printing timeframes of the US Treasury.
While this doesn’t allow for massive spikes in value it does mean that the gambling operation would not run the risk of massive losses based on currency fluctuations.
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