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Chinese language Companies Fueling the Fentanyl Epidemic Obtain Tens of Thousands and thousands in Crypto Funds

Chinese language Companies Fueling the Fentanyl Epidemic Obtain Tens of Thousands and thousands in Crypto Funds

2023-05-24 20:40:35

Key factors:

  • Most fentanyl trafficked into the US is manufactured utilizing precursors imported from Chinese language suppliers.
  • Elliptic researchers obtained provides from greater than 90 China-based firms to provide fentanyl precursors, 90% of which accepted cryptocurrency funds. Many talked about that they’ve shipped the identical chemical substances to Mexico.
  • Many of those companies have been additionally keen to provide fentanyl itself, regardless of this being banned in China since 2019.
  • Elliptic’s blockchain evaluation exhibits that the cryptocurrency wallets utilized by these firms have obtained 1000’s of funds, totaling simply over $27 million, and that the variety of transactions has elevated by 450% year-on-year. $27 million would buy sufficient precursor to supply fentanyl drugs with a avenue worth of roughly $54 billion.
  • Evaluation of blockchain transactions additionally exhibits {that a} recognized fentanyl trafficker paid tens of 1000’s of {dollars} in Bitcoin to certainly one of these suppliers. 

Fentanyl overdoses are actually the main reason for loss of life for these aged 18-45 in the US. Cheaper to supply than heroin and 50 occasions stronger, this artificial opioid has fueled an epidemic over the previous decade, in addition to changing into an enormous supply of earnings for worldwide drug cartels.

For a few years, China was the principle supply of illicit fentanyl. However in 2019 following intense diplomatic strain from the US, the Chinese language authorities regulated the drug – successfully banning its export.

Nevertheless, removed from stemming the tide, illicit fentanyl imports into the US have soared. That’s as a result of Mexican drug cartels have stepped in to fill the void and seize the market – manufacturing their very own fentanyl utilizing precursors (chemical elements) imported from China. 

The US authorities has positioned rising emphasis on disrupting the monetary exercise of fentanyl traffickers and their provide networks. In a fact sheet printed on April eleventh, the White Home indicated that it intends to “increase its efforts to disrupt the illicit monetary actions that fund these criminals by rising accountability measures, together with monetary sanctions”. 

Three days later, on April 14th, the US Division of the Treasury sanctioned a number of people and companies in China for supplying precursor chemical substances to drug cartels in Mexico for the manufacturing of fentanyl meant for the US market. The sanctions additionally listed cryptocurrency wallets utilized by these companies to obtain funds. 

The Elliptic analysis group recognized greater than 90 China-based chemical firms that have been keen to provide fentanyl precursors, and which are providing cryptocurrency as a fee methodology.

Our researchers obtained provides to provide giant portions of 1 specific fentanyl precursor. This chemical is just not used within the manufacture of some other merchandise, and is a managed substance in most international locations. Nevertheless, it stays unregulated in China. 


Fentanyl precursor    Menu of Chemicals

(Left) A photograph shared by one of many chemical suppliers, purportedly displaying inventory of the fentanyl precursor. (Proper) A “menu” of chemical substances offered to our researchers, together with precursors for artificial opioids, methamphetamine and amphetamine.


Throughout our correspondence, the suppliers confirmed no considerations about how the chemical could be used, with some explaining that it was their best-selling product and might be used to supply fentanyl. Others pointedly talked about that that they had offered it to prospects in Mexico. When requested whether or not these Mexico-based prospects paid utilizing cryptocurrency, one responded:

“They all the time use USDT or Bitcoin to pay . It’s no drawback.”

Seventeen of the companies even provided to supply fentanyl itself – regardless of the Chinese language authorities ban. Others provided to supply different artificial opioids much more potent than fentanyl, however which are at the moment authorized to supply and promote in China.

Most of the firms additionally provided to provide a spread of different chemical substances, lots of that are precursors for different artificial opioids, methamphetamine and amphetamine. 


Mexico Email - 1

Mexico Email - 2

Mexico Email - 3-1

In e mail correspondence, the suppliers highlighted that they’ve shipped fentanyl and fentanyl precursors to Mexico on many events. 


Of the China-based chemical producers that agreed to provide the fentanyl precursor of fentanyl itself to our researchers, 90% offered a cryptocurrency pockets tackle for fee. Bitcoin was by far the preferred cryptocurrency, adopted by Tether, the US greenback stablecoin. 

Elliptic’s blockchain evaluation instruments present that these wallets have obtained 1000’s of cryptocurrency funds, totaling simply over $27 million. The variety of crypto funds to those chemical suppliers has elevated by 450% year-on-year.

To place this into perspective, $27 million might buy sufficient of the precursor to supply fentanyl drugs with a avenue worth of $54 billion – probably producing huge earnings for the distributors of the completed product. This quantity of fentanyl would technically be enough to trigger 8.6 billion folks to endure a deadly overdose from the drug.

Whereas clearly there is not going to be such a big mortality charge, the figures show that the fentanyl commerce is extraordinarily worthwhile for the drug cartels who promote the completed product, and intensely harmful for many who eat it.


Cryptocurrency payments received by identified fentanyl precursor suppliers

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The variety of cryptocurrency funds despatched to addresses shared by the precursor suppliers has elevated by 450% year-on-year. The vast majority of funds by US greenback worth have been in bitcoin, with Tether, the USD stablecoin, second.

Elliptic’s blockchain analytics additionally reveals {that a} recognized fentanyl trafficker has made important Bitcoin funds to one of many precursor suppliers. Alex Peijnenburg was sanctioned by US authorities in November 2022, for promoting thousands and thousands of {dollars} value of fentanyl and different medication to US shoppers by way of on-line shops. Between March 2019 and Might 2020, a pockets managed by Peijnenburg despatched Bitcoin transactions totaling $84,598 to one of many Chinese language firms that provided to promote fentanyl to our researchers.


A screenshot from Elliptic Investigator, showing some of the Bitcoin payments from Peijnenburg to the China-based chemical supplier.

A screenshot from Elliptic Investigator, displaying among the Bitcoin funds from Peijnenburg to the China-based chemical provider.


It’s maybe shocking that so many of those companies have been keen to simply accept cryptocurrency funds, regardless of the Chinese language authorities’s anti-crypto stance. Cryptoasset exchanges are banned from working within the nation, and abroad exchanges can not service Chinese language residents. Regardless of this, the vast majority of the chemical suppliers that accepted crypto have been utilizing accounts at exchanges primarily based outdoors of China – all at three particular exchanges. This may increasingly additionally point out that these companies use intermediaries to assist them convert cryptocurrency funds to renminbi.

This discovering means that the commerce in fentanyl precursors for crypto might be disrupted by the providers that act as gateways into and out of cryptoassets. Most crypto exchanges now adjust to anti-money laundering (AML) laws and sanctions, and use blockchain monitoring programs – akin to these offered by Elliptic – to make sure that they don’t facilitate illicit exercise.

Elliptic has notified the exchanges being utilized by these firms, and have flagged tons of of crypto addresses in our instruments as being linked to this exercise. We’re monitoring the scenario, and can proceed our efforts to stop cryptocurrencies from being exploited by these engaged on this lethal commerce.


In our upcoming analysis report The Use of Crypto in Fentanyl Traffickingwe additional discover using crypto throughout the fentanyl provide chain, from the uncooked chemical producers, by way of to the darkish internet distributors promoting a spread of artificial opioids – some much more deadly than fentanyl. We additionally look at how cryptoassets might be prevented from being exploited for this lethal commerce.

Sign up now to obtain this report as quickly because it’s launched.


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