The crypto research firm Elliptic uncovered this week the illicit scheme involving a cryptocurrency exchange from Cambodia named Huione Guarantee that has allegedly processed over $11 billion in transactions – the majority of which were linked to illegal activities.
The exchange was founded in 2021 and it is apparently connected with the country’s ruling family – the Hun. According to Elliptic’s findings, the exchange would also engage in “pig butchering” practices, which involve using social engineering to steal money from investors who deposit assets into the exchange.
The investigation uncovered sinister operations that included catering to fraudsters and online scam operators by offering services and products that facilitated their activities. Huione acts as an intermediary to facilitate these transactions and provides escrow services to help fraudsters deal with each other.
Payments are primarily made in USDT. However, bank transfers and payment apps are also supported by its platform.
Huione Processed Over $3 Billion in Transactions in 2023 Alone
According to Elliptic, a study of the wallets linked to the crypto exchange shows that more than $3 billion in transactions were processed by Huione in 2023. These estimates are considered incomplete as merchant wallets and other forms of off-chain payments cannot be traced easily.
Most merchants in Huione specialize in moving money – primarily, and often explicitly, to launder it for online fraudsters. Their services and fees vary depending on the perceived risk that the funds can be frozen by law enforcement agencies.
Criminals can use these services to accept money from their victims, launder cryptocurrencies obtained from hacks, convert digital assets into fiat money, and other similar purposes.
Other obscure services include website design for phishing, pig butchering, and scamming. These sites collect the user’s information and ask for permission to use the person’s camera to collect data from their telecom equipment and even facial expressions to access their financial accounts.
Scammers are also offered products used to harm victims physically like tear gas, electric batons, and electronic shackles that can be used to torture victims and prevent abducted individuals from escaping their captors.
The discovery that the exchange has major ties to the Hun family was one of the most alarming findings uncovered by Elliptic. The Huione Group is a large conglomerate that operates in Cambodia with interests in various sectors of the economy including real estate, insurance, and air transportation.
Also read: KuCoin’s Regulatory Quandary: A Deep Dive into Anti-Money Laundering Violations
The investigation reveals that one of the directors of Huione Pay is Hun To, a cousin of the current Prime Minister of the country – Hun Manet. Hun To has already been linked to other illicit activities including drug trafficking and money laundering by authorities in Australia.
Meanwhile, a subsidiary of this company, Huione International Payments, is reportedly engaged in laundering the proceeds from cyber scams. These allegations are bombshells, especially given the Cambodian government’s extremely harsh punishments for drug (and other) offenses.
Huione is a Powerhouse in the Global Crypto Fraud Industry
In one recent exchange documented by Elliptic, a representative of Huione International Payments appeared to agree to handle $2 million originating from fraud for a fee of 10.5%.
Elliptic documented a specific transaction that involved laundering $2 million in proceeds from a fraudulent activity in exchange for a 10.5% fee. To understand how large and impactful Huione’s operations are, a report from the Federal Bureau of Investigation (FBI) recently revealed that crypto fraud in the United States amounted to $3.94 billion last year.
These scams not only victimize those who are tricked into transferring cryptocurrency but usually engage in human trafficking and forced labor as well. Reports have emerged of compounds in Myanmar, the Philippines, Cambodia, and other Southeast Asian countries where people are forced to live and work generating content to target scam victims.
Elliptic Takes Steps to Prevent Firms from Dealing with Huione’s Laundered Funds
In light of these findings, Elliptic has taken steps to help combat the illicit use of crypto assets facilitated by Huione Guarantee. Hundreds of cryptocurrency addresses controlled by Huione companies and used by merchants on the platform have been labeled by the research firm.
Exchanges and other businesses receiving crypto assets can now screen transactions for links to Huione-related wallets to help them prevent money laundering. Stablecoin operators like Tether (USDT) and Circle (USDC) can also block these black-listed crypto wallets to avoid exposure to these ill-gotten proceeds. Additionally, Elliptic’s investigation tools can be used by law enforcement agencies to trace payments and pursue those responsible for these scams.
Elliptic’s research on Huione Guarantee sheds light on the sophisticated ecosystem that has emerged to aid crypto scams and for pig butchering operations in particular. This ecosystem includes tools and data for identifying and deceiving targets, money laundering services to help fraudsters enjoy their ill-gotten proceeds, and detention tools to imprison and coerce human trafficking victims.
While Huione Guarantee is the largest escrow platform for illicit crypto transactions known to Elliptic, it is part of a broader network of similar platforms. Tom Robinson, Elliptic’s cofounder and chief scientist, notes that they are aware of around 10 similar platforms used by crypto scammers. However, none of these are anywhere near the scale of Huione Guarantee.
These marketplaces have significantly lowered the barriers to entry for potential scammers. As Robinson explains: “Scammers no longer need to acquire victims’ contact details, build telecoms infrastructure, or launder the scam proceeds themselves. They can outsource each of these to this community of service providers.”
Despite the wealth of information uncovered by Elliptic, there are still aspects of Huione Guarantee’s operations that remain hidden. The researchers were unable to penetrate some “VIP” Telegram channels that appeared to be selling scam-related offerings on the platform.
Ties to Cambodia’s Ruling Family Allow Huione to Operate Without Boundaries
The public nature of many criminal transactions on the platform is particularly alarming and probably only permitted due to its connection to Cambodia’s political elite. The use of Chinese-language jargon, however, can make it difficult for outsiders to fully understand the nature of the transactions.
For example, “quick kill” refers to a financial scam, “runaway dogs” refers to trafficked prisoners who might try to escape, and “dog pushers” refers to people working in the scammer’s compound.
Also read: Inside Singapore’s Largest Money Laundering Scheme Washing Billions of Dollars
The appearance of platforms like Huione Guarantee in Cambodia can be partly attributed to the country’s special economic zones and their connection to Chinese investments. Sophos senior threat researcher Sean Gallagher notes that many pig butchering operations in Cambodia are run out of hotels and resorts that struggled with plummeting tourism during the COVID-19 pandemic.
These facilities, often financed or owned by Chinese companies in connection with special economic zones, follow a similar playbook. They recruit workers from the surrounding region, often through deception, confiscate passports upon arrival, and use physical punishment to enforce compliance.
While much attention is focused on the financial losses incurred by victims of crypto scams, it’s important to acknowledge the tremendous human suffering caused by these operations.
The Elliptic report showcases how Huione even facilitates the sale of tools used to imprison and torture workers in compounds, including shock-enabled GPS tracking shackles, electric batons, and other similar devices. These items underscore the brutal reality faced by many individuals who are forced into working for these criminal operations.
The brazen nature of Huione Guarantee’s operations, while disturbing, may also present an opportunity for disruption. Tom Robinson of Elliptic suggests that international sanctions targeting Huione’s leadership could be an effective approach.
“This has the hallmarks of a darknet marketplace, but it’s run by a large Cambodian conglomerate, which has documented links to the ruling family there,” Robinson stressed. “There is surely scope to impose sanctions on a business such as this, to hinder this type of marketplace from operating.”
As crypto scams continue to evolve and expand, the need for coordinated global action to dismantle these networks is becoming quite urgent. The transparency afforded by blockchain technology offers some hope for tracking and disrupting these operations.
However, it will require concerted efforts from cryptocurrency exchanges, law enforcement agencies, and policymakers to effectively combat this growing threat to financial security and human rights.