Feds Dig Into Crypto Markets to Catch Fentanyl Traffickers: ‘This Isn’t Some Random Dude with a Duffel Bag’


The Biden administration has intensified its efforts to crack down on the multibillion-dollar fentanyl trafficking trade that kills thousands of Americans each year. To do this, they are focusing on tracing cryptocurrency payments used by Mexican drug cartels to purchase fentanyl ingredients from Chinese chemical companies.

Data from Elliptic, a private crypto-tracking analysis firm, shows that transactions for fentanyl ingredients have surged by 450% in the last year through April. To counter this, a multi-agency effort is underway, involving the DEA, IRS, and Department of Homeland Security (DHS).

The DEA is investing in crypto-tracing software and identifying the cartels’ most sophisticated money launderers. The IRS has its most tech-savvy agents tracing payments on dark web forums. DHS is leading a team of forensic specialists to pore over digital clues from stash houses near the Mexican border.

The two cartels targeted by US officials, Sinaloa and Jalisco New Generation Cartel (CJNG), have developed sophisticated crypto operations to finance their fentanyl business. Cash is still king for the cartels, so agents have found cryptocurrency addresses written down on scraps of paper at stash houses. In another case, DHS agents monitored a cartel-connected crypto account for over a year until it sent $200,000 to an accountant used to launder money.

The cartels’ increased use of digital currency has made some traditional law enforcement methods obsolete. But digital money also leaves a trail that investigators can follow. Elliptic found 100 China-based chemical companies touting fentanyl, fentanyl ingredients or equipment to make drugs that accepted payments in cryptocurrency.

The US has sanctioned and secured federal indictments against several Chinese companies allegedly involved in the production of fentanyl. Federal agents are also tracking a global network of money launderers in dozens of countries, from Thailand to Colombia, who receive drug money in one type of cryptocurrency and convert it to another to try to obscure the source of the funds.

DHS has established a federal task force that focuses on infiltrating dark-web forums and tracking crypto payments to find vulnerabilities in the cartel infrastructure. Agents are working to make the most of the huge series of fentanyl busts in Arizona and California this spring, when agents seized nearly five tons of the deadly drug, worth over $100 million.

Barring more cooperation from the Chinese government, which US officials say has been limited, the Biden administration is focusing on tracing cryptocurrency payments to combat the fentanyl trade. Agents are optimistic that high-tech methods will help them find and stop the cartels.

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