Blockchain analytics firm Chainalysis has uncovered a direct financial connection between Mexican drug cartels and Chinese fentanyl precursor suppliers through cryptocurrency transactions.
Blockchain analytics firm Chainalysis has uncovered a direct financial connection between Mexican drug cartels and Chinese fentanyl precursor suppliers through cryptocurrency transactions. In a recent report, the firm highlighted how cryptocurrency is increasingly involved in the illicit drug trade.
The discovery was made during a civil forfeiture case in Wisconsin, where authorities seized $5.5 million in cryptocurrency. This seizure exposed the way cartel-affiliated money launderers in the U.S. transferred funds to Chinese chemical manufacturers who supply fentanyl precursors. Despite China’s ban on cryptocurrency, Chinese manufacturers remain the primary source of fentanyl precursors, pill presses, and other equipment used in the production of synthetic opioids.
The report revealed that transactions made by these cartels used relatively unsophisticated crypto techniques, such as moving funds through centralized exchanges and unhosted wallets. These transactions were fast and straightforward, prioritizing speed over security, making them visible to investigators.
Chainalysis noted that these cartels, including the Sinaloa Cartel and the Jalisco New Generation Cartel, use "bulk cash-to-crypto pipelines" to pay for fentanyl precursors. Law enforcement has identified multiple components in this crypto-driven supply chain, which includes Chinese manufacturers who openly advertise their products online, postage services accepting crypto, and darknet markets facilitating transactions.
From 2018 to 2023, a group of suspected China-based chemical traders received more than $37.8 million in payments made through cryptocurrency, according to Chainalysis’ data. This shows the scale of the connection between Chinese suppliers and Mexican cartels.
The increasing use of crypto has allowed cartels to bypass financial controls, with Chinese nationals using cryptocurrency and underground banking networks to move money. Despite the illicit nature of these transactions, the relatively simple methods used by the cartels still make them effective in moving funds for fentanyl production.
This report underscores how blockchain analytics is becoming an essential tool in uncovering the complex financial networks tied to drug trafficking. The growing role of cryptocurrency in the illicit drug trade highlights the challenges law enforcement faces in tracking and dismantling these operations.
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