The U.S. Department of Justice just dropped the hammer on one of the biggest illicit marketplaces on the internet. Xinbi Guarantee, a Telegram-based hub for scam services, is now in serious trouble.

On Wednesday, the DOJ announced a coordinated takedown. They seized Telegram channels used to run the service. They confiscated two cryptocurrency wallets. And they sent the Scam Center Strike Force to Madagascar to disrupt 13 scam compounds run by Chinese organized crime syndicates.

The Hacker News reported on the operation, citing the DOJ and Treasury Department.

Let me break down what happened and why it matters.

Quick Summary

What Is Xinbi Guarantee?

Xinbi Guarantee is a marketplace that operates on Telegram. It rose to prominence after two other similar storefronts, HuiOne Guarantee and its successor Tudou Guarantee—were shut down last year.

The marketplace acts as an intermediary between vendors and scam center operators. It's a one-stop shop for criminal services.

What It Offers:

• Custom scam investment websites
• Money laundering for wire fraud proceeds
• Trafficking victims to work in scam compounds
• Stolen personal data for targeting victims

The Scale:

According to blockchain analytics firm Elliptic, Xinbi is the second-largest illicit marketplace of all time. Since it was founded in 2022, it has enabled transactions valued at $30 billion.

How the Scam Works

Xinbi is involved in a scheme that goes by the name “Pig Butchering Scam.” Here's how they work:

• Scammers contact victims through dating apps or social media
• They build a fake relationship over weeks or months
• They convince the victim to invest in a fake cryptocurrency platform
• The victim sends money
• The scammers disappear with the funds

Xinbi provides the infrastructure for this. It holds payments in escrow until vendors complete their services. This assures scammers that the vendors will deliver.

"Once a scammer 'purchases' a service from the vendor, Xinbi as an organization holds money to be paid to the vendor until the vendor's services are complete," the DOJ said.

The Takedown

The DOJ's actions were coordinated and aggressive.

What They Did:

• Seized Telegram channels hosting the marketplace
• Banned associated usernames
• Confiscated two cryptocurrency wallets used to collect payments
• Froze $52.8 million worth of cryptocurrency from 52 wallets
• Deployed the Scam Center Strike Force to Madagascar

The Scale of the Strike Force:

The Scam Center Strike Force has now restrained approximately $938 million in total. That's a lot of money taken out of the hands of criminals.

The Madagascar Operation:

The strike force helped disrupt 13 scam compounds in Madagascar. More than 3,200 electronic devices were seized. Nearly 400 people were arrested. About 30 of them are believed to be Chinese leaders of the scam compounds and have been repatriated to China.

The Treasury Department's Role

The Treasury Department's Office of Foreign Assets Control (OFAC) also took action. They sanctioned the Chinese-language media for facilitating cyber scams, fraud, money laundering, and other criminal activity targeting Americans.

"Scam centers in Southeast Asia steal billions of dollars from American victims each year," said Treasury Secretary Scott Bessent. "The Trump Administration is united in its efforts to dismantle these overseas criminal enterprises."

The Crypto Crackdown

All payments on Xinbi have historically been made in Tether's USDT stablecoin, mainly on the TRON blockchain.

But Tether has a built-in freeze feature. That's a problem for criminals.

After the freeze, Xinbi switched to USDD (Decentralized USD), another stablecoin pegged to the U.S. dollar. Xinbi is estimated to have exchanged about $2.8 million of its remaining USDT into USDD.

The Problem with USDD:

"Unlike USDT, which is issued by Tether and has a built-in feature that allows the company to freeze wallets, USDD has no central issuer or freezing capability," said Dr. Tom Robinson, Founder and Chief Scientist at Elliptic. "However, its claims of decentralization are contested, and it is still exposed to freezing risk, since USDD is partly collateralized with freezable USDT."

The Trust Issue:

Elliptic described the actions as a "severe setback" to the Guarantee marketplace ecosystem. It undermines the trust that merchants and criminal users have in these marketplaces.

"Merchants and users of these services will now be operating with the knowledge that their wallets may be identified and frozen at any time," Elliptic added. "This uncertainty undermines the core mechanism these marketplaces rely on to function."

Will Xinbi Come Back?

Dr. Robinson told The Hacker News that we might see Xinbi emerge under a different name. That's essentially what happened with Huione Guarantee, it reemerged as Tudou Guarantee.

"But Tudou didn't last long and I think it will be challenging for Xinbi to survive, even under a new name," he said.

What This Means for You

The Risk:

Pig butchering scams are growing. They target everyday people through dating apps and social media. The scammers are organized, well-funded, and patient.

How to Stay Safe:

• Do not trust quick online friendships. The minute your online acquaintance starts discussing cryptocurrency investments with you after meeting you just a few days ago, be wary.
• Never send money to someone you haven't met in person. Especially not cryptocurrency.
• Do your research. If an investment platform seems too good to be true, it probably is.
• Report suspicious activity. If you think you've been targeted, contact law enforcement.

The Bottom Line

The DOJ and Treasury Department have dealt a significant blow to Xinbi Guarantee. However, the scammers have still not been completely stopped. They have taken control of Telegram channels, frozen millions of dollars worth of cryptocurrencies, and destroyed their operations in Madagascar.

What You Need to Know:

What You Need to Do:

• Don’t trust quick internet romances
• Do not give your money to anyone you haven’t met
• Investigate investment sites
• Report anything that seems odd

FAQ Section

What is Xinbi Guarantee?

Xinbi Guarantee is an illicit marketplace on Telegram that facilitates scam services. It acts as an intermediary between vendors and scam center operators running pig butchering scams.

What did the DOJ do?

DOJ took down Telegram channels, seized crypto wallets, froze $52.8 million worth of assets, and dispatched the Scam Center Strike Force to Madagascar targeting 13 scam facilities.

What is the meaning of the term "pig butchering scam"?

Pig butchering is a type of romance scam in which scammers establish fake relationships with their victims and persuade them to invest money in phony cryptocurrency exchanges.

Why did Xinbi shift from using USDT to USDD?

Tether’s USDT has a freeze option that makes the firm capable of freezing any wallet. The USDD coin, being decentralized, lacks such functionality. On the other hand, the USDD token is partially backed by the USDT.

Will Xinbi come back?

It's possible. Huione Guarantee reemerged as Tudou Guarantee after being shut down. But Elliptic believes it will be challenging for Xinbi to survive, even under a new name.

Source: The Hacker News