Bitrace, in an article republished by WuBlockchain, examined the jargon used in Chinese-speaking crypto money-laundering networks, with a focus on the terms "Liao," "Liao laundering," "type of Liao," and "Liao adulteration." The article says organized crime networks in East and Southeast Asia use a large number of coded expressions shaped by local culture and specific criminal trades, creating a high barrier for investigators and researchers, especially those who do not know Chinese or Chinese cultural context well.
Bitrace said it plans to keep publishing explanations of this vocabulary to support related investigative work. This article is the second in that series and centers on the term "Liao" in the context of online crypto laundering.
What "Liao" means in crypto laundering
According to the article, "Liao" carries different meanings across different underground sectors. In crypto laundering, it refers to fiat money linked to illegal activity such as fraud, extortion, online gambling, and human trafficking. In most cases, it means electronic balances held in bank accounts or other financial-platform accounts that are waiting to be laundered.
The article lists several common laundering routes: card-to-USDT, QR-to-USDT, cash-to-USDT, and cash-to-material-assets, usually precious metals or other goods with strong resale value.
Bitrace says the mechanics differ, but the underlying logic is the same: convert traceable electronic fiat into harder-to-trace crypto, goods, or cash in order to avoid law-enforcement action or scrutiny from financial platforms.
A card-to-USDT example
The article uses card-to-USDT, described as the most common method, to show how a typical laundering chain works in a romance-fraud case.
In Bitrace's example, a first-hand card-to-USDT merchant operating in a guarantee public group first posts collateral on a guarantee platform, then takes orders and receives fiat directly from victims through bank cards. That merchant then buys USDT from a cooperating second-hand card-to-USDT merchant at a higher price and finally transfers part of the purchased USDT to the fraud operators.
Bitrace says the first-hand and second-hand merchants complete the laundering process together and earn a spread, but adds that real-world operations are much more complex, with deeper layers and more varied exchange methods.
The article also says lower layers sit closer to victims, making judicial freezes more likely and front-line launderers easier to arrest. Because of that risk, merchants at those layers can charge higher commissions. In that framework, first-hand Liao is more dangerous than second-hand Liao.
"Type of Liao" and how funds are classified
After discussing risk by laundering stage, the article turns to "type of Liao," a broader classification system used to sort funds and price laundering services.
By victim type
- Pupil Liao: money taken from school-age victims. The article says fraudsters may approach them through video-game top-ups or idol-support campaigns, then threaten them into secretly transferring their parents' money by claiming their parents could lose their jobs or face judicial investigation.
- Part-time Job Liao: funds obtained by building fake groups or apps and luring victims, often stay-at-home mothers and college students, with part-time income schemes that push them to transfer money to designated accounts or buy fake goods.
- Se Liao or Porn Liao: proceeds generated by luring victims through prostitution-related or porn-related hooks, then steering them into fake investment or task-based schemes that extract money.
- Pig Butchering Scam Liao: funds obtained after fraudsters build fake identities, start online romantic relationships, and then induce victims to join sham investment projects. The article says this method is called "pig butchering" when the victim is Chinese and "sheep butchering" when the victim is Western.
By crime type
- Online Gambling Liao, also called BC Liao or 菠菜料: fiat deposited by gamblers to online gambling platforms. The article says these funds usually go through simple laundering before circulation, a process commonly called "running point."
- Ponzi Scheme Liao: money paid upward by participants in pyramid-style Ponzi operations. Bitrace says these schemes often last for months, giving launderers more time to process the funds.
- Chinese Authority Impersonation Liao: proceeds from scams in which criminals impersonate Chinese public-security or judicial authorities. The article notes that the FBI created a specific translation for this type in a report because many Chinese students overseas were targeted by the scheme.
How "Liao adulteration" changes risk and pricing
The article says the timing and intensity of law-enforcement intervention vary depending on the type of illegal activity, the life cycle of the scheme, and the victim group. In laundering circles, that translates into different levels of "toxicity," with different commission rates attached to each type of funds.
Bitrace gives several examples. Gamblers rarely report their own dealings with online gambling platforms, so gambling-related funds are seen as relatively low risk and carry the lowest commission rates. In Ponzi schemes, victims often do not report the case during the months before the scheme collapses, so lower rates may apply early and higher rates may apply to the final round. By contrast, in scams involving impersonation of Chinese authorities, victims almost always contact law enforcement quickly, making the funds easier to freeze and more expensive to clean.
That pricing gap, the article says, has produced a common form of deception known as "Liao adulteration." In this practice, the owner of the funds tells a laundering group that the money is low-risk, while actually delivering higher-risk proceeds. The goal is to reduce laundering costs. The consequence is that the laundering group underestimates the toxicity of the funds, and its bank cards or crypto wallets end up flagged by risk-control systems.
The Tron address case cited by Bitrace
As an example, the article points to Tron address TGEXn4HzdRHz83cNqGCobAzg558VFR9K2d, which Tether froze on Sept. 2, 2026. Bitrace says the address was a downstream "running point" address for an online gambling platform. After it received a large amount of funds tied to an unspecified incident involving Coinbase, the address became part of a joint enforcement effort involving an exchange and Tether, leading to losses of more than $625,000.
Bitrace presents that case as one consequence of "Liao adulteration."
Bitrace's closing note
The article says it offers a brief introduction, from the perspective of a case investigator, to laundering methods, fund categories, and fund-related threats in the crypto laundering sector. Its stated aim is to help researchers in different countries conduct intelligence work on Chinese-speaking laundering networks.
It also says exchange risk-control teams and OTC practitioners should stay alert to these threats and avoid having business addresses subjected to judicial restrictions.