As a world-renowned free port and international financial center, Hong Kong has already seen a thriving crypto-economy several years before the official preferential policies were introduced. Among them, virtual asset over-the-counter trading service providers (VAOTCs) that conduct business in the form of offline stores and online groups are particularly distinctive, providing token exchange and deposit and withdrawal services to Hong Kong virtual asset investors together with local native and overseas virtual asset trading service providers (VATPs).

However, due to the high anonymity and borderless nature of virtual assets based on blockchain technology, various cryptocurrencies related to criminal activities, especially stablecoins, can flow into Hong Kong's crypto-economy without obstacles, causing capital pollution to the business addresses of local operators and ordinary investors, and bringing legal and compliance risks.

This article aims to use the recent money laundering incident of mainland college students going to Hong Kong as a starting point for analysis, explore the ways in which the Southeast Asian fraud industry has damaged Hong Kong's crypto-economy in this incident, and disclose relevant data.

Event description

On March 26, 2025, a mainland college student received a part-time job on a second-hand goods trading platform and was asked to go to Hong Kong to purchase a certain amount of Tether (USDT) through a local money changer and transfer it to a designated blockchain address. The errand process is to use a personal bank card to collect RMB, and after exchanging it for Hong Kong dollar cash at a local fiat currency exchange shop, go to a designated cryptocurrency exchange shop to buy USDT and have the shop directly transfer it to a 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 he was told that the funds he received were transferred by the victims of the upstream fraud incident.

Afterwards, Bitrace and Mankiw Law Firm investigated and found that this was a typical "card back to U" money laundering method, which is closely related to the organized crime network in Southeast Asia.

On-chain analysis

A financial analysis of the designated receiving U address TTb8Fk revealed that the student purchased 2,396 USDT from the designated money changer. The funds subsequently flowed into the guarantee platform merchant address TKN5Vg, which has long-term business ties with HuioneGuarantee and NewcoinGuarantee in Southeast Asia.

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

This shows that this is a vicious incident in which a Southeast Asian fraud group used Hong Kong cryptocurrency money changers to launder funds.

The model is the common "Crypto-based money laundering" method, which means that after the money launderers receive the stolen money in legal currency from the victims of fraud, they quickly go to the over-the-counter market to exchange it for USDT, and then transfer it back to the blockchain address of the fraudsters, and get commissions from it. Since the purchase of 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 "cannons" or "drivers".

In this incident, the mainland students became money launderers without knowing it, and together with Hong Kong VAOTC, helped the money launderers complete the conversion of funds. The USDT obtained first entered the team address, and after deducting the commission (the calculated rebate ratio was 33%), the team transferred the funds to the guarantor merchant, and finally settled the funds through the guarantee platform.

Industrialization of Crime

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

Tracing the source of funds of the rebate address, we can find 7 other first-level rebate U addresses (third from left). These addresses are at the same level as TTb8Fk. They all received varying amounts of USDT from Hong Kong money changers (first from left, second from left, HKVAOTC), of which 33% was transferred to the rebate address (marked in red) and 67% was transferred to the second-level rebate U address (second from right), which were then dumped through the guarantee platform. The whole process has a very clear division of labor.

Analysis shows that these addresses have been active since 2024. The initial source of funds has nothing to do with Hong Kong, but a large number of Southeast Asian black and gray industry risk addresses.

This further indicates that behind this case is a gang closely related to the Southeast Asian organized crime network.

In less than three months, this money laundering team alone has illegally laundered more than 310,000 US dollars in Hong Kong through the same method. Considering that there are still other addresses that have not been expanded or other gang addresses have not been detected in this case, the actual scale of this kind of industrialized money laundering activities that illegally use HKVAOTC may be even larger.

Hong Kong VAOTC Industry on the Eve of Dawn

Shao Shiwei, a lawyer at Shanghai Mankiw Law Firm, said that from a global perspective, the regulatory framework for OTC traders in various countries and regions has not yet reached a completely unified level. However, major OTC operating locations such as Hong Kong, the European Union, and the United States have begun to formulate relevant bills and license management regulations.

Take Hong Kong as an example. In February 2024, the Financial Services and Treasury Bureau (FSTB) issued a legislative consultation document on virtual asset over-the-counter (OTC) services. An important suggestion was made in the document, namely, to introduce a licensing system for OTC dealers with the help of the Anti-Money Laundering and Terrorist Financing Ordinance (AMLO). According to this proposal, Hong Kong plans to establish a licensing management system for OTC dealers through the Anti-Money Laundering and Terrorist Financing Ordinance (AMLO), the core purpose of which 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 provide virtual asset over-the-counter trading services, including OTC dealers, must apply for the corresponding license from the Hong Kong Customs and Excise Department (CCE) and strictly abide by relevant legal provisions. However, as of now, the legislation is still in the consultation stage, and the specific implementation details and effective time are still to be officially announced by the government.

Industry operators need to actively respond to supervision

At present, VAOTC has become an indispensable part of the cryptocurrency market, playing an extremely critical role in market stability and industry development. With the upcoming introduction of OTC compliance policies in Hong Kong, operators in the industry must take a more proactive attitude to meet regulatory requirements.

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

At the same time, operators should further strengthen communication and exchanges with regulatory agencies, actively learn about the latest policy trends, and actively participate in industry self-regulatory organizations to contribute to the standardized development of the entire industry.

In this process, industry operators need to pay special attention to refusing to be associated with any crypto funds involved in illegal activities. By implementing strict customer due diligence and transaction monitoring measures, identify and resist those suspicious fund flows to avoid providing any convenience for illegal activities.

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

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