Elliptic, a blockchain analytics company, has exposed a network of 100 individual suppliers utilizing various cryptocurrencies, including Bitcoin, Ethereum, Tron, and Monero, to conduct illegal payments. These individuals have been aiding the illegal fentanyl trade by smuggling the precursor chemicals essential for fentanyl synthesis and transferring funds from buyers to suppliers, ultimately leading to Mexico as the final destination.
Elliptic uncovers illicit trade facilitated by crypto
Elliptic’s report looks into the chemical supply chain that fuels the distribution of controlled substances, exacerbating the drug epidemic in the United States and worldwide. The study underscores the significant role of cryptocurrencies in facilitating this illicit trade.
The investigation by Elliptic has unveiled a network of suppliers who furnish precursor chemicals for fentanyl production and accept cryptocurrency payments, streamlining the transaction process. The report discloses the existence of 80 distinct groups associated with 144 unique cryptocurrency addresses across Bitcoin, Ethereum, Tron, and Monero blockchains, all linked to suppliers of fentanyl precursor chemicals.
Once acquired, these chemicals are transported to Mexico, evading customs checks and law enforcement detection. Subsequently, the illicit materials are distributed to various locations in Mexico, including Mexico City, and states like Querétaro and Jalisco, which fall under the influence of the notorious Cartel Jalisco Nueva Generación (CJNG).
While cryptocurrencies are not the sole payment method for these chemicals, they play a substantial role in this trade. According to Elliptic’s research, suppliers received over $32 million through three major cryptocurrencies: Bitcoin, Tether (USDT) on Tron, and Tether (USDT) on Ethereum.
The data also highlights a staggering 450% year-on-year surge in the payments received by fentanyl precursor suppliers since 2021. Bitcoin leads the way with $19 million, followed by Tether (USDT) on Tron with $9 million and USDT on Ethereum with $4 million.
Moreover, these suppliers also provide chemicals for producing other illicit drugs. The underground drug market, encompassing fentanyl, methamphetamine, and ecstasy, confronts a severe crisis, potentially flooding the market with drugs valued at billions of dollars. That exacerbates the ongoing global drug crisis, potentially leading to a street value exceeding $50 billion.
The fight to cut fentanyl purchases intensifies
The Biden administration recently revealed that it is intensifying its efforts to trace cryptocurrency payments used by dangerous Mexican drug cartels to purchase fentanyl ingredients from Chinese chemical companies. This crackdown is part of a renewed attempt to combat the multi-billion-dollar fentanyl trade, which claims thousands of American lives annually.
A multi-agency effort is underway to keep up with the evolving methods used to finance and traffic fentanyl into the US. This effort extends beyond tracking cartel activities to monitoring dark web forums where Americans acquire fentanyl.
Various federal agencies are employing digital-first tactics to disrupt the fentanyl trade. The Drug Enforcement Agency invests in crypto-tracing software and targets sophisticated money launderers linked to cartels. The IRS is deploying its most tech-savvy agents to trace payments on dark web platforms. Additionally, a Department of Homeland Security investigations unit leads a team of forensic experts to analyze digital evidence from stash houses near the Mexican border.
While federal agents have been tracking cartel finances and supply routes for years, the Department of Homeland Security has recently escalated its surveillance efforts. Although there have been notable busts, including a seizure of nearly five tons of fentanyl this spring along the border, officials caution that there is still much work to be done.
An earlier report by Chainalysis investigating cryptocurrency transactions linked to suspected China-based fentanyl precursor sellers discovered that such addresses have received over $37.8 million of cryptocurrency since 2018. The exposure to these addresses was extensive, spanning Latin America, North America, Europe, and Asia. Furthermore, the on-chain flows to these addresses are aligned with fentanyl seizures in the U.S.-Mexico border, indicating a potential link between cryptocurrency transactions and fentanyl production.
