By Shiela Bertillo
This week, investigators handling the ₱30-billion flood-control scandal revealed a major breakthrough, and a major complication.
A government official confirmed that the suspects behind the scheme have been laundering public funds through cryptocurrency, allowing them to move as much as ₱100 million per transaction.
What began as a traditional corruption probe is now a cross-border digital asset chase. As Undersecretary Renato Paraiso put it, the team is confronting a “new phenomenon” in how public funds are being concealed.
The scale of the alleged laundering has fueled public anger.
But how did the scandal expand from padded flood-control contracts into a fully developed crypto-based laundering network?
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For our international readers, here’s a summary of the flood control scandal. Also, US$1 is roughly ₱58-₱59.
The Discovery: Funds Moving Into USDT
Renato Paraiso, ICI-TWG
Information shared with ABS-CBN revealed that key personalities in the scandal were converting huge sums of pesos into Tether (USDT) and other cryptocurrencies.
Instead of moving funds via fiat, the contractors reportedly used a web of “representatives”, which are effectively money mules, to convert and transfer the money via crypto.
According to Paraiso, USDT became the asset of choice because it can be stored in cold wallets and moved peer-to-peer, avoiding the visibility of traditional banking systems.
This setup allowed funds to cross borders quickly, landing in “financial havens” and crypto exchanges beyond Philippine jurisdiction.
It is important to note, however, that USDT can be frozen by Tether Inc., the company that issues it.
“We Have No Jurisdiction Over Foreign Exchanges”
From Paraiso’s TV interview: investigators admitted that most of the recovery so far succeeded only because one foreign exchange voluntarily cooperated.
In one case involving a flood control personality, the platform holding their USDT agreed to freeze and return the funds when flagged by the Anti-Money Laundering Council (AMLC). (Note: In one interview, he said it was the Discaya couple, but he did not identify them when asked in another interview.)
But Paraiso stressed that this was goodwill, not enforcement.
From the way he answered the reporter’s inquiry, it appears other exchanges might have ignored requests, leaving authorities empty-handed. (Note that this is speculation for now.)
Complicating matters further: suspects reportedly used VPNs to access blocked platforms like Binance, bypassing local restrictions and taking advantage of offshore environments with weaker oversight.
It should be noted, however, that using VPN to access Binance is against its terms of service. However, the Binance app is still available on the app stores.
₱50M–₱100M per Transfer: Moving Through Multiple Layers
In a follow-up TV interview, Paraiso confirmed that suspects were moving “exorbitant” amounts, ₱50 million to ₱100 million per transaction, through a mix of cold wallets, P2P markets, and offshore exchanges.
Flood-control personalities laundering money through crypto, he said, involved a network sophisticated enough to mask the identities of the beneficial owners through multiple layers of intermediaries or representatives.
This makes the investigation more complex and highlights the gaps in Philippine jurisdiction over cross-border digital assets.
Usec. Renato Paraiso, Independent Commission for Infrastructure’s Technical Working Group (ICI-TWG):
“The basis that we were able to recover USDTs is just cooperation. If exchanges don’t respond to our request, there is nothing we can do because we do not exercise jurisdiction over them.”
Why it matters: This scandal is becoming a landmark case in how corruption attempts to exploit digital assets.
It exposes real limitations in enforcement, jurisdiction, and regulatory coverage, and these are problems that lawmakers are now trying to address through structural reforms:
One such proposal is the Cadena Act, filed by Senator Paolo Benigno “Bam” Aquino, which aims to place government budgets and procurement on a transparent, immutable public ledger.
It should, however, be noted that there are multiple instances when crypto firms have assisted local enforcement and regulators in tracing and retrieving crypto funds. Here’s one such story this year.
What’s next:
Shiela Bertillo, writer of this newsletter: Investigators are now working with the DOJ and DFA to revisit mutual legal assistance treaties (MLATs) so the government can pursue tokenized assets abroad more effectively.
Michael Mislos, Editor of BitPinas: It is in the interest of international crypto exchanges, especially those that want to have a license in the Philippines, to help local authorities as sign of good faith and respect to the country’s jurisdiction over those digital assets.
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