Behind the virtual currency money laundering case involving students: The Southeast Asian fraud industry is infiltrating Hong Kong

Hong Kong, as a world-renowned free port and international financial center, has seen a prosperous crypto-economic ecosystem emerge locally several years before the official preferential policies were introduced. Among these, virtual asset over-the-counter trading service providers (VAOTC), which operate through offline stores and online groups, are particularly distinctive. Together with local and overseas virtual asset trading service providers (VATP), they provide token exchange and fund inflow and outflow services for Hong Kong's virtual asset investors.

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

This article aims to analyze the recent money laundering incident involving mainland university students going to Hong Kong as a starting point, exploring the ways in which the Southeast Asian fraud industry harms Hong Kong's crypto economy and disclosing relevant data.

Incident Description

On March 26, 2025, a mainland university student received a part-time job on a second-hand goods trading platform, being asked to go to Hong Kong to purchase a certain amount of Tether (USDT) through a local exchange shop and transfer it to a designated blockchain address. The process involved using a personal bank card to receive RMB, exchanging it for Hong Kong dollars at a local fiat currency exchange shop, and then going to a designated cryptocurrency exchange shop to buy USDT, which was directly transferred to the designated wallet by the shop.

After purchasing USDT worth tens of thousands of RMB in this way, the student's bank card and WeChat Pay were frozen by mainland law enforcement, and they were informed that the funds received were transferred from victims in upstream fraud incidents.

Subsequent investigations by Bitrace and Mankun Law Firm revealed that this was a typical "card-to-U" money laundering method, closely related to organized crime networks in Southeast Asia.

On-chain Analysis

Analyzing the designated receiving address TTb8Fk revealed that the student purchased 2,396 USDT from the designated exchange shop. This fund subsequently flowed into the merchant address of a guarantee platform TKN5Vg, which has long-standing business connections with two Southeast Asian guarantee firms, HuioneGuarantee and NewcoinGuarantee.

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

This indicates that it is a malicious event where Southeast Asian fraud groups utilize Hong Kong's cryptocurrency exchange shops for money laundering.

The method is a common "card-to-U (Crypto-based money laundering)" technique, meaning that money launderers collect fiat currency from fraud victims and quickly exchange it for USDT in the over-the-counter market, then transfer it back to the blockchain address of the fraudsters, earning a commission in the process. Since purchasing USDT requires a significant amount of bank card and real-name information, money launderers recruit a large number of part-time workers in advance to form a "money laundering syndicate," with these part-time workers referred to as "card farmers" or "runners."

In this incident, the mainland student unknowingly became a money laundering runner, helping money launderers complete the conversion of funds together with Hong Kong VAOTC. The USDT obtained first entered the syndicate address, and after deducting the commission (calculated at a rebate rate of 33%), the funds were transferred to the guarantee merchant and ultimately settled through the guarantee platform.

Criminal Industrialization

Bitrace further expanded the analysis of the rebate address TGeZzC, discovering that this money laundering incident is not an isolated case but rather the tip of the iceberg of a highly industrialized large money laundering gang.

Tracing the source of funds for the rebate address, seven other primary return addresses (left three) can be found. These addresses are at the same level as TTb8Fk and have received varying amounts of USDT from Hong Kong exchange shops (left one and two, HKVAOTC), with 33% transferred to the rebate address (marked in red) and 67% transferred to secondary return addresses (right two), which are then dumped through the guarantee platform. The entire process exhibits very clear division of labor characteristics.

Analysis shows that these addresses have been active since 2024, and the initial source of funds is unrelated to Hong Kong but rather involves numerous high-risk addresses from Southeast Asia's black and gray industries, further indicating that the case is linked to an organized crime network in Southeast Asia.

In less than three months, this single money laundering syndicate has illegally laundered over $310,000 in Hong Kong using the same method. Considering that there are still other addresses in this case that have not been expanded or other gang addresses that have not been detected, the actual scale of such industrialized money laundering activities utilizing HKVAOTC may be even larger.

The Dawn of Hong Kong's VAOTC Industry

Lawyer Shao Shiwei from Shanghai Mankun Law Firm stated that globally, the regulatory framework for OTC merchants in various countries and regions has not yet reached a fully unified level. However, major operating locations for OTC, such as Hong Kong, the European Union, and the United States, have begun to draft relevant legislation and licensing management regulations.

Taking Hong Kong as an example, the Financial Services and the Treasury Bureau (FSTB) released a legislative consultation document on virtual asset over-the-counter (OTC) services in February 2024. The document proposed an important suggestion to introduce a licensing system for OTC merchants through the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). According to this proposal, Hong Kong plans to establish a licensing management system for OTC merchants through the AMLO, with the core purpose of ensuring that these companies can meet compliance requirements related to anti-money laundering (AML) and customer identity verification (KYC).

This means that all companies engaging in virtual asset over-the-counter trading services, including OTC merchants, must apply for the corresponding licenses from Hong Kong Customs (CCE) and strictly comply with relevant legal regulations. However, as of now, this legislation is still in the consultation stage, and specific implementation details and effective dates are yet to be officially announced by the government.

Industry Operators Need to Actively Respond to Regulation

Currently, VAOTC has become an indispensable part of the cryptocurrency market, playing a crucial role in market stability and industry development. With Hong Kong about to introduce OTC compliance policies, operators in the industry must adopt a more proactive attitude to meet regulatory requirements.

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

At the same time, operators should further strengthen communication and interaction with regulatory authorities, actively seek to understand the latest policy developments, and participate in industry self-regulatory organizations to contribute to the standardized development of the entire industry.

In this process, industry operators particularly need to emphasize rejecting any association with illegal activities involving cryptocurrency funds. By implementing strict customer due diligence and transaction monitoring measures, they can identify and resist suspicious fund flows, avoiding providing any convenience for illegal activities.

This not only helps maintain the good reputation of the enterprise but also reflects the enterprise's fulfillment of social responsibility.

Overall, the upcoming OTC compliance policies in Hong Kong represent an important opportunity for the virtual asset over-the-counter trading industry to achieve standardized development. Operators in the industry should seize this opportunity, proactively adapt to changes in the regulatory environment, continuously enhance their compliance levels, and thereby strengthen their competitiveness. Only in this way can they maintain an invincible position in the prosperous market of Hong Kong's crypto economy and achieve long-term stable development.