Chinese labs sell Fentanyl ingredients for millions in Crypto

Despite that trend to crack down on dark web fentanyl sales, four members of the US Congress reintroduced a bill this week called the Dark Web Prohibition Act to increase penalties for dark web drug dealers, with a specific focus on fentanyl. The bill would also strengthen and make permanent the Joint Criminal Opioid and Dark Web Enforcement Task Force, which has helped law enforcement take down hundreds of suspected dark web drug dealers and administrators in recent years.

But even as dark web retailing of cryptocurrency fentanyl has been curtailed, and as law enforcement agencies crack down on what remains of it, Elliptic’s research shows that the wholesale sale of cryptocurrency-based fentanyl ingredients to drug cartels, which then manufacture are a synthetic opioid. and smuggling it into the US and other countries for sale in the physical world continues. In its study of chemical labs selling precursors, Elliptic notes that several websites it examined specifically stated that they shipped to customers in Mexico, and 17 of the labs also sold ready-made fentanyl and other even more powerful opioids.

Those Chinese chemical companies in some cases sell products other than fentanyl precursors, Elliptic’s Robinson notes, and he acknowledges that blockchain analysis cannot distinguish between those sales and sales of fentanyl ingredients. Some also sold precursors to amphetamines, methamphetamines, and other opioids. But Elliptic researchers saw companies touting fentanyl precursors as their best-selling products in some cases. Robinson also notes that Elliptic does not claim to have measured the entire crypto-based fentanyl supply chain, but only captured a “snapshot” of transactions that it could identify. This suggests that his estimate of $27 million is likely lower than the total sales of fentanyl precursors over the past half decade.

The US government may be increasingly aware of the activities of fentanyl precursor sellers in China and the role of cryptocurrency, but so far the US has operated on a much smaller scale than the Elliptic industry has revealed. Last month, the US Treasury Department sanctioned four Chinese nationals and two chemical labs, Wuhan Shuokang Biological Technology and Suzhou Xiaoli Pharmatech, for selling fentanyl precursors to Mexican drug cartels. Three of the men were also charged in absentia. The fourth, according to the Treasury statement, was a partner who accepted cryptocurrency payments on behalf of one of the two companies.

The decision by Chinese chemical companies to accept cryptocurrency for the sale of fentanyl ingredients may seem controversial given the ability of Elliptic and other cryptocurrency tracking companies to track the sale of dangerous and potentially illegal products on blockchains. But Robinson says Chinese firms likely use crypto because it is difficult to seize or block, and they may not be particularly concerned that the money can be traced by Western companies and law enforcement as long as they can find the cryptocurrency. exchange willing to cash it. out. “If a company in China wants to accept crypto payments, no one can stop it,” says Robinson.

But traceability also creates an opportunity to pressure cryptocurrency exchanges to cut off the accounts of sellers of fentanyl precursors that Elliptic discovered. Elliptic has, in fact, notified hundreds of email exchanges linked to Chinese chemical companies. “There’s definitely a role for those services to tighten that up,” Robinson says. And exploiting that stealth choke point could potentially cut off at least some of the deadly flow of fentanyl around the world, not at its destination, but at its source.

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