In a groundbreaking revelation made by blockchain analytics company, Chainalysis, direct financial ties have been discovered between Mexican drug cartels and Chinese suppliers of the drug precursor, fentanyl, via cryptocurrency transactions. Crypto, they say, has gradually become enveloped with the illegal drug trade. The firm’s findings reveal a complex network of participants involved in this on-chain fentanyl trade.
These discoveries come to light following a civil forfeiture case in Wisconsin that led to the confiscation of crypto assets amounting to $5.5 million. This incident unraveled a sequence of events showing how money laundering operations affiliated with cartels in the United States had been funneling funds directly to Chinese chemical manufacturers.
In spite of China’s strict prohibition on cryptocurrency, Chinese firms maintain their position as principal providers of fentanyl predecessors. Evidence from recorded transactions highlights Mexican cartels as the main buyers. The study goes on to reveal how individuals in China bypass restrictions on foreign currency purchases by using alternative methods like cryptocurrency and underground banking.
A surprising revelation from Chainalysis discloses that cartel-associated networks utilize relatively basic crypto strategies, prioritizing speed over security allowing for simple yet efficient transactions highly visible to investigating authorities.
The two primary Mexican organizations involved as per Chainalysis are the Sinaloa Cartel and Cartel Jalisco Nueva Generación. These groups apparently set up “cash-to-crypto pipelines” in bulk to expedite payments. Law enforcement agencies have identified several parts operating in this cryptographically enabled supply chain extending from Chinese manufacturers to postage services who accept crypto payments, and even darknet markets that allow transactions. Over a span of five years from 2018 to 2023, one group of likely suspects based in China is reported to have received payments in excess of $37.8 million through cryptocurrency.