KEY POINTS
- Garantex was sanctioned in 2022 for "willfully" disregarding AML and CFT obligations
- Tether assisted US law enforcement in a major illicit funding crackdown operation this month
- A UN report in January said crypto-based money launderers used USDT on illegal gambling platforms
The United States and United Kingdom have launched an investigation into over $20 billion of cryptocurrencies that passed through Garantex, a sanctioned Russia-based crypto exchange, and Tether is at center of the probe, a new report revealed.
The digital asset transactions under scrutiny for passing through Garantex were in Tether (USDT), a prominent dollar-pegged stablecoin, Bloomberg reported Thursday, citing people familiar with the matter who spoke on condition of anonymity to discuss a matter that hasn't been made public.
The sources noted that the multi-billion-dollar scrutinized transactions could be the single-largest sanctions breach since Russia invaded Ukraine early in 2022. They noted, however, that investigations were in the early stages, which means conclusions on whether Tether committed any wrongdoing were too early to make at this point.
A Tether spokesperson reiterated that the blockchain platform is committed to cooperating with law enforcement to help prevent criminal activities, as per the report. Tether did not immediately respond to International Business Times' request for further comments.
Since the war started, Washington and London have been cracking down on illicit efforts helping Russia's war against Ukraine. Among the crypto businesses that were sanctioned in the clamp down was Garantex. The virtual currency exchange was sanctioned in April 2022, with the U.S. Treasury Department saying the virtual currency exchange "willfully" disregarded anti-money laundering and countering the financing of terrorism (AML/CFT) obligations.
"Analysis of known Garantex transactions shows that over $100 million in transactions are associated with illicit actors and darknet markets," the Treasury said at the time of the sanction's announcement.
The reported investigation comes about three weeks after Tether helped the U.S. Department of Justice (DOJ) and FBI in a recent seizure of some $1.4 million USDT tokens from a tech support scam network. In the said operation where the "suspected fraud proceeds" were seized and were expected to be returned to victims, the U.S. Attorney's office "acknowledged" the stablecoin giant for its assistance.
At the time, Tether said its voluntary support in law enforcement efforts to recover stolen funds underlines its commitment to ensuring that cryptocurrencies aren't used "in the commission of financial fraud." Also earlier this month, Tether blacklisted four USDT addresses, one of which contained $20.01 million in USDT.
However, this is not the first time Tether has been under fire for the USDT's supposed involvement in illegal financial activities. The United Nations Office on Drugs and Crime (UNODC) said in a January report that illegal gambling platforms have been a popular avenue for "cryptocurrency-based money launderers, particularly for those using Tether or USDT on the TRON blockchain."
Tether CEO Paolo Ardoino said at the time that the stablecoin titan was open to collaboration with global law enforcement and the UN.
