162% Fraud Increase, 99% Profit Margin

I was having coffee with a friend last week when he brought up the news: Tether, the company behind the world's largest stablecoin, just froze $182 million worth of USDT tokens across five crypto wallets. Law enforcement request. Suspected illicit activity. One of their biggest enforcement actions.

"See, they're finally getting serious about crime," he said. The Genius Act passed, Treasury cracked down, stablecoins cleaned up their act.

I realized he believed what everyone believes: the problem is fixed. Tether's business model evolved after Treasury got involved. That $182 million freeze proves they're proactive about stopping crime.

Let me show you what actually happened between May 2024 and January 2026, and why the only thing that changed is how good Tether got at PR.

U.S. Treasury flags Huione Group. Public designation. Cambodia-based money laundering operation moving billions for North Korean hackers, organized crime groups, human trafficking operations. Treasury calls them a critical node in the global money laundering network.

This isn't a quiet internal memo. This is Treasury standing up and saying: these people launder money for the worst actors on the planet. Everyone knows.

Three months pass.

A new Huione wallet address activates on the TRON blockchain. Starts moving USDT. Tens of millions per day, according to blockchain analysis firm ChainArgos.

Tether's compliance tools see it immediately. They partner with Chainalysis and TRM Labs, the two biggest blockchain analytics firms in the world. Both firms identify the wallet as belonging to Huione Group. These are Tether's own partners, the tools Tether pays for exactly this information.

The wallet moves tens of millions daily. Tether watches. Does nothing.

A man loses money to scammers. Community leader his whole life. Detective Brad Thorne follows the blockchain trail to that Huione wallet. The one Treasury flagged. The one moving tens of millions daily. The one Tether's compliance tools identified.

The man kills himself.

"It's the embarrassment, the shame of it all," Thorne said. "He'd been a community leader his whole life and I think that was too much for him to take."

Tether keeps earning 4% interest on the criminal proceeds flowing through that wallet.

Kamlesh Mungekar, 54 years old, gets a call in late September. The voice says they're New Delhi police. Money laundering investigation. Indian authorities are involved. They tell him his ability to travel back to India will be restricted. Then they threaten jail time.

They walk him through liquidating his retirement accounts. Over a million dollars converted to cryptocurrency. "They completely hijacked my brain," Mungekar told ICIJ investigators. "I was under a lot of stress."

The scammers encourage him to get family and friends to pay in too. That's when he realizes he's been destroyed.

Same day, October 8th: Mungekar emails Tether customer support. "Please help me to recover my lifetime of retirement fund."

Tether responds: "Sorry to hear about this unfortunate situation. We are not in a position to determine the validity of these transfers."

His stolen funds funneled straight into the same Huione address linked to the Idaho suicide. Four blockchain tracing experts later confirmed the trail for ICIJ.

Mungekar sends another email: "This crime has destroyed my retirement savings. It has destroyed me mentally and financially."

Tax penalties from early retirement withdrawal will finish what the scammers started. "I don't know how I will come out of this," he said.

That single Huione wallet moved $1.4 billion in USDT. All after Treasury's May designation. All while Tether's compliance tools identified it. All while victims begged Tether to freeze their stolen funds.

Erin West, former prosecutor and founder of Operation Shamrock, didn't mince words: "It is reprehensible that Tether would let so much money flow through a service flagged for money laundering. They should have frozen this."

Mid-October: Treasury announces Huione will be formally severed from the U.S. financial system. Blacklist effective November 17th. Between announcement and effective date, the wallet receives another 65 million USDT and sends out another 65 million. Tether does nothing.

Detective Thorne digs deeper. Finds the wallet funding web platforms scammers use to ensnare hundreds of victims. "This is the deeper infrastructure of money laundering," he said.

Tether makes money two ways, and both ways paid out while that Huione wallet destroyed lives.

Transaction fees: Every time USDT moves, Tether gets a cut. $1.4 billion moving generated fees on every transaction.

Net interest margin: This is the real money. Tether holds $187 billion in reserves backing USDT. Most sits in U.S. Treasury bills earning 4-5% yield. They pay USDT holders zero interest. The spread is pure profit.

$187 billion at 4% is $7.5 billion in annual interest income. Before transaction fees. 99% profit margin.

Every dollar sitting in USDT earns Tether 4% annually. Criminal proceeds, victim funds, legitimate holdings, it all generates the same yield. The Huione wallet's $1.4 billion earned Tether interest the entire time.

Tether reported $5.2 billion in profit for the first half of 2024 alone. They hold more than $97.6 billion in U.S. Treasuries, making them one of the largest buyers of Treasury bills in the world.

2021: CFTC fines Tether $41 million for lying about reserves. They only maintained full backing during 27.6% of days between 2016-2018.

October 2023: Wall Street Journal reports Tether increasingly showing up in money laundering, terror financing, and sanctions evasion investigations.

October 2024: Wall Street Journal reports Tether is target of federal criminal investigation for possible sanctions and anti-money laundering violations. Investigation ongoing.

UN Office on Drugs and Crime, early 2024: Report identifies USDT on TRON as preferred vehicle for cyber fraud, money laundering, illegal gambling.

This is the pattern. Operate until forced to stop. Claim compliance while tokens flow through every major crime operation. When caught, point to enforcement actions only taken because law enforcement forced them.

International Consortium of Investigative Journalists publishes The Coin Laundry. Cross-border investigation with 37 media partners. Documents everything. The $1.4 billion. Tether's compliance tools identifying it in real time. The Idaho suicide. The San Diego retirement account. The choice to let it all flow while earning 4% on criminal proceeds.

President Trump signs the Genius Act. First comprehensive federal framework for stablecoins. Requirements: 100% reserves, anti-money laundering programs, Bank Secrecy Act compliance, technical capability to freeze wallets when legally required.

Headlines say the problem is solved. Except here's what they don't mention: The Genius Act takes effect January 18, 2027. Or 120 days after regulators issue implementing rules. Whichever comes first.

Today is January 30, 2026. The law isn't in effect yet. The implementing rules don't exist yet. Nothing changed except everyone thinks it did.

Chainalysis publishes their 2026 Crypto Crime Report on January 8, 2026, covering 2025 data. Illicit cryptocurrency addresses received $154 billion in 2025. That's a 162% increase from 2024.

The year after the Genius Act passed, crypto crime increased 162%.

Stablecoins: 84% of all illicit transaction volume, up from 63% in 2024. TRON: 58% of illicit volume. North Korea: $2 billion stolen, most destructive year on record. Russia's A7A5 stablecoin: $93.3 billion transacted in its first year, created explicitly for sanctions evasion.

The problem metastasized.

Three weeks ago. Tether freezes $182 million in USDT across five TRON wallets. DOJ and FBI coordination.

Headlines celebrate it. "Tether Cracks Down." "Stablecoin Enforcement Works."

Look closer. Tether froze the wallets after DOJ and FBI formally requested it. After investigations concluded. Not before. Not proactively. When forced.

DOJ sentences Jingliang Su to 46 months for laundering $36.9 million in USDT. Cambodia. 174 U.S. victims. Same month: DOJ charges Venezuelan national Jorge Figueira with laundering $1 billion using USDT on TRON. Feds quoted him: "Let me be clear with you, [USDT] is used a lot for laundering money."

He managed up to $700 million per month. That's $700 million earning Tether transaction fees and 4% interest every month until law enforcement stopped it.

Traditional banks already follow these exact rules. BSA compliance. AML programs. Sanctions screening. The whole apparatus exists.

Banks still facilitate billions in fraud every year. Zelle scams hit $870 million in 2023. But banks at least try to stop obvious fraud when systems flag it.

Tether had Chainalysis and TRM Labs identifying a Treasury-sanctioned money laundering operation moving $1.4 billion and chose to let it flow.

Banks face real consequences for BSA violations. Wells Fargo paid $3 billion for fake accounts. HSBC paid $1.9 billion for money laundering. Regulators can revoke charters, impose consent orders, ban executives.

Stablecoins? The Genius Act creates the framework. But enforcement comes later. The actual consequences that make banks think twice don't exist yet for stablecoins.

Tether already claims to do everything the Genius Act requires. They formed the T3 Financial Crime Unit with TRON and TRM Labs in September 2024, pledging to "proactively work with law enforcement."

By October 2025, they announced freezing $300 million. Justin Sun: "If you're using USDT on TRON for crime, you will be caught."

The Huione wallet operated on TRON. Treasury flagged Huione three months before the wallet started. Tether's compliance tools identified it. Victims traced funds to it. Law enforcement confirmed it.

Tether let $1.4 billion flow through anyway.

Their official statement to ICIJ: "Decisions to freeze wallets are executed in coordination with law enforcement with jurisdiction and are not made unilaterally based on external labeling or speculative attribution. Freezing wallets prematurely during an active investigation can impede evidence collection."

Translation: we make money every time these tokens move and we're not stopping until someone forces us.

$154 billion in crypto crime for 2025. Stablecoins are 84% of illicit transactions. Tether's market cap: $187 billion. They earned $5.2 billion in profit in first half of 2024, most from net interest margin.

Three weeks ago, they froze $182 million after DOJ formally requested it. Three days ago, DOJ sentenced someone for laundering through USDT to Cambodia. Same pattern. Same infrastructure. Same business model: profit over action until forced otherwise.

The Genius Act won't change this. Not until it takes effect in January 2027. Not until regulators issue implementing rules. Not until enforcement actions carry real consequences.

Banks have those consequences now. Billion-dollar fines. Charter revocations. Executive bans.

Stablecoins don't. The gap between "must comply with BSA" and "will face real penalties for not complying" is where Tether lives. Where they've always lived.

A man in Boise killed himself. A man in San Diego lost his retirement and faces tax penalties that will destroy what's left of his life. Tether earned transaction fees on both plus 4% annual interest on the funds while they sat in USDT.

That's not a bug in their business model. That's the feature. Every dollar that moves through USDT generates fees. Every dollar that sits in USDT earns 4% interest. Criminal proceeds, victim funds, legitimate holdings, it all pays the same.

$7.5 billion in annual interest income on $187 billion in reserves. Transaction fees on top. 99% profit margin. No real consequences yet.

Why would they change?

Got a Second? The KillChain reaches 6,000+ security professionals, portfolio managers, compliance officers, and serious crypto investors every week. While retail chases headlines, our readers track institutional flows, on-chain behavior, and fraud patterns that predict what happens next. Know someone who needs to stay five moves ahead? Forward this newsletter.

Current Prices (January 30, 2026):

This isn't a crypto correction. This is coordinated deleveraging across every risk asset simultaneously.

Gold hit $5,608 Thursday before crashing 9% Friday to $5,064, finishing the week up just 2%. Silver topped $121.64 then plunged 26% to $84 before recovering to $99, essentially flat week-over-week after the most violent whipsaw in decades. Both rallied on dollar weakness (four-year lows), Fed independence concerns, and geopolitical chaos before profit-taking obliterated gains when Trump nominated Kevin Warsh as next Fed chair.

Equities showed relative strength. S&P 500 closed at 6,969 (up 0.77%), Nasdaq gained 0.78% to 23,685, supported by Big Tech earnings. But VIX spiked to 16.88, and the 10-year Treasury yield climbed to 4.67% as bonds sold off alongside equities: classic liquidation pattern.

JPMorgan slashed Q1 GDP forecasts from 2.1% to 1.3%. Consumer confidence fell for the sixth consecutive month. Government shutdown threats loom with the January 30 funding deadline. Trump's tariff policy remains weaponized uncertainty.

When gold, silver, equities, bonds, and crypto all sell together, that's margin calls or systematic risk limits forcing position reduction. Crypto correlates to institutional risk management, not retail sentiment.

Week-over-week: -6.05%

What the Fraudfather is Doing: Core BTC unchanged. No new deployments until genuine capitulation or macro stabilizes.

Bitcoin broke the 50-day MA at $87,200 and tested the 200-day MA at $84,500. Hold above $84k and this consolidates. Break below targets $78k-$80k.

ETF flows reveal the mechanics: five consecutive days of net outflows totaling $1.2 billion. Fidelity's FBTC bled $487M, Grayscale's GBTC lost $312M. BlackRock's IBIT absorbed $156M but couldn't offset systematic selling.

This is rebalancing, not panic. When equity allocations drop 4% and bonds fall 2%, institutional mandates force reduction across all risk assets including crypto. The selling is policy-driven, not discretionary.

On-chain metrics confirm managed liquidation. Realized profit collapsed from $890M daily to $124M. Whale exchange inflows dropped 43% week-over-week. MVRV ratio at 1.87, well below the 2.4+ levels that mark cycle tops. Bitcoin trades 13% below short-term holder cost basis while long-term holders remain 87% in profit: consolidation mechanics, not distribution.

Institutional calculus: Bitcoin offers 2x upside to $170k-$200k over 12-18 months in bull scenarios. But with Q1 GDP forecasts collapsing and government shutdown threats active, discretionary capital waits for better entry points while systematic strategies reduce gross exposure.

Key Levels: Support at $84k (200-day MA). Break below targets $78k-$80k. Resistance at $92k caps rallies until macro improves.

Week-over-week: -8.15% (underperforming BTC by 210bps)

What the Fraudfather is Doing: Core position unchanged. Monitoring L2 value capture. No averaging down until fee dynamics improve.

Ethereum bleeds harder because it carries embedded DeFi leverage and attracts traders betting on smart contract dominance. When risk appetite contracts, those bets get cut first.

The L2 problem accelerated. Arbitrum, Base, and Optimism combined processed 7 million daily transactions versus Ethereum's 1.1 million on mainnet. Every $0.001 transaction on Base is a transaction not paying $2-5 in ETH gas fees. Base layer fees collapsed to $1.80 average, down from $8-12 during peak activity. Lower fees mean less ETH burned, inflation returns despite staking lockup.

Staking provides the only structural support: 35 million ETH staked (29.1% of supply) generates $4.2B annual yield. Grayscale added 47,000 ETH to staking this week despite ETF outflows: institutions separating price speculation from yield positioning.

Ethereum ETF outflows totaled $387M over five days while 47,000 ETH moved into staking. Different capital, different mandates, executing simultaneously.

Key Levels: Support at $2,600-$2,650 (200-day MA). Resistance at $2,950-$3,000.

Week-over-week: -7.14%

What the Fraudfather is Doing: On watchlist. Watching $110 support. Not deploying until technical confirmation or capitulation flush.

Solana's 90-day correlation to Nasdaq hit 0.73. When tech loses 2% and Bitcoin drops 6%, SOL dropping 7% is mechanical beta expression.

The paradox: on-chain fundamentals improved while price fell. Daily active addresses hit 4.2M (up 3.1%), DEX volume totaled $8.3B, TVL reached $9.1B. Stablecoin supply held at $15.4B. Real infrastructure remained intact while speculative positioning unwound.

SOL ETFs posted $2.1M inflows Monday before reversing to $8.4M outflows Tuesday-Friday. Actual capital deployment waits for technical confirmation.

The $110 level is the 200-day MA and 90-day VWAP where algorithmic support concentrates. Hold above $110 and this consolidates. Break below tests $95-$100, where leveraged longs liquidate and institutional buyers find value.

Key Levels: Critical support at $110. Break below tests $95-$100. Resistance at $130.

Goldman's crypto desk is executing delta-neutral vol strategies capturing 60% implied vol on BTC options. Systematic rebalancing sells strength above $87k, buys capitulation below $80k. Options structures profit whether we grind sideways or break in either direction.

This is systematic strategies executing predetermined rules while discretionary capital waits. JPMorgan notes crypto allocations remain at 1.8% average, down from 2.3% in December but still above 0.8% from 2023. That's position sizing to match risk appetite, not capitulation.

Managed unwinds find equilibrium through time, not price. Capitulation finds bottoms through violent flushes. We're grinding through the former. When Fear & Greed hits mid-teens while ETF inflows return positive and on-chain shows accumulation, that's the signal. We're not there yet.

60% allocated: cash, equities, precious metals. 40% core BTC/ETH/SOL, unchanged since November. Zero new crypto deployments until genuine capitulation (sub-$80k BTC with same-day ETF inflows) or macro stabilization (tariff clarity, GDP stabilizing, VIX below 18).

The opportunity will be obvious when it arrives. For me, preservation matters more than participation during systematic liquidation. Let institutions finish rebalancing. Let leverage clear.

Battlefield discipline: capital preservation is the winning strategy.

The KillChain Disclaimer

Not Financial Advice. The KillChain provides market intelligence for educational purposes only. Nothing here constitutes investment, legal, accounting, or tax advice. References to "accumulation zones," "buy levels," or trading language describe analytical frameworks, not recommendations to buy, sell, or hold any asset.

You're In Command. You alone are responsible for your investment decisions. Consult a registered investment adviser or qualified professional regarding your individual circumstances. Do your own research. Verify everything. Trust no one, including us.

Crypto Is Volatile and Risky. Digital assets are highly speculative. You can lose some or all of your investment. Past performance doesn't predict future results. Markets can go to zero. Regulatory landscapes shift. Exchanges fail. Wallets get hacked. If you can't afford to lose it, don't invest it.

We May Hold Positions. The FraudFather and KillChain contributors may hold positions in assets discussed. We're sharing analysis as market participants, not acting as your fiduciary, broker, or adviser. Our interests may not align with yours.

Stay Sharp. Stay Solvent. This newsletter is for sophisticated readers who understand risk management and personal responsibility. We provide intelligence. You make decisions.