Chinese Businesses Fueling the Fentanyl Epidemic Receive Tens of Millions in Crypto Payments

ph1l · Jun 1, 2023

When fiat won't function for that felonious transaction, crypto's the cure for that fentanyl fix!
https://www.elliptic.co/blog/chines...c-receive-millions-in-cryptocurrency-payments

Chinese Businesses Fueling the Fentanyl Epidemic Receive Tens of Millions in Crypto Payments
23 May, 2023

Elliptic Research
Key points:

Most fentanyl trafficked into the United States is manufactured using precursors imported from Chinese suppliers.

Elliptic researchers received offers from more than 90 China-based companies to supply fentanyl precursors, 90% of which accepted cryptocurrency payments. Many mentioned that they have shipped the same chemicals to Mexico.

Many of these businesses were also willing to supply fentanyl itself, despite this being banned in China since 2019.

Elliptic’s blockchain analysis shows that the cryptocurrency wallets used by these companies have received thousands of payments, totaling just over $27 million, and that the number of transactions has increased by 450% year-on-year. $27 million would purchase enough precursor to produce fentanyl pills with a street value of approximately $54 billion.

Analysis of blockchain transactions also shows that a known fentanyl trafficker paid tens of thousands of dollars in Bitcoin to one of these suppliers.

Fentanyl overdoses are now the leading cause of death for those aged 18-45 in the United States. Cheaper to produce than heroin and 50 times more potent, this synthetic opioid has fueled an epidemic over the past decade, as well as becoming a huge source of profits for international drug cartels.

For many years, China was the main source of illicit fentanyl. But in 2019 following intense diplomatic pressure from the US, the Chinese government regulated the drug – effectively banning its export.

However, far from stemming the tide, illicit fentanyl imports into the US have soared. That’s because Mexican drug cartels have stepped in to fill the void and seize the market – manufacturing their own fentanyl using precursors (chemical ingredients) imported from China.

The US government has placed increasing emphasis on disrupting the financial activity of fentanyl traffickers and their supply networks. In a fact sheet published on April 11th, the White House indicated that it intends to “expand its efforts to disrupt the illicit financial activities that fund these criminals by increasing accountability measures, including financial sanctions”.

Three days later, on April 14th, the US Department of the Treasury sanctioned several individuals and businesses in China for supplying precursor chemicals to drug cartels in Mexico for the production of fentanyl intended for the US market. The sanctions also listed cryptocurrency wallets used by these businesses to receive payments.

The Elliptic research team identified more than 90 China-based chemical companies that were willing to supply fentanyl precursors, and that are offering cryptocurrency as a payment method.

Our researchers received offers to supply large quantities of one particular fentanyl precursor. This chemical is not used in the manufacture of any other products, and is a controlled substance in most countries. However, it remains unregulated in China.

(Left) A photo shared by one of the chemical suppliers, purportedly showing stock of the fentanyl precursor. (Right) A “menu” of chemicals provided to our researchers, including precursors for synthetic opioids, methamphetamine and amphetamine.

During our correspondence, the suppliers showed no concerns about how the chemical would be used, with some explaining that it was their best-selling product and could be used to produce fentanyl. Others pointedly mentioned that they had sold it to customers in Mexico. When asked whether these Mexico-based customers paid using cryptocurrency, one responded:

“They always use USDT or Bitcoin to pay . It is no problem.”

Seventeen of the businesses even offered to provide fentanyl itself – despite the Chinese government ban. Others offered to provide other synthetic opioids even more potent than fentanyl, but that are currently legal to produce and sell in China.

Many of the companies also offered to supply a range of other chemicals, many of which are precursors for other synthetic opioids, methamphetamine and amphetamine.

In email correspondence, the suppliers highlighted that they have shipped fentanyl and fentanyl precursors to Mexico on many occasions.

Of the China-based chemical manufacturers that agreed to supply the fentanyl precursor of fentanyl itself to our researchers, 90% provided a cryptocurrency wallet address for payment. Bitcoin was by far the most popular cryptocurrency, followed by Tether, the US dollar stablecoin.

Elliptic’s blockchain analysis tools show that these wallets have received thousands of cryptocurrency payments, totaling just over $27 million. The number of crypto payments to these chemical suppliers has increased by 450% year-on-year.

To put this into perspective, $27 million could purchase enough of the precursor to produce fentanyl pills with a street value of $54 billion – potentially generating enormous profits for the distributors of the finished product. This amount of fentanyl would technically be sufficient to cause 8.6 billion people to suffer a fatal overdose from the drug.

While clearly there will not be such a large mortality rate, the figures demonstrate that the fentanyl trade is extremely profitable for the drug cartels who sell the finished product, and extremely dangerous for those who consume it.

The number of cryptocurrency payments sent to addresses shared by the precursor suppliers has increased by 450% year-on-year. The majority of payments by US dollar value have been in bitcoin, with Tether, the USD stablecoin, second.

Elliptic’s blockchain analytics also reveals that a known fentanyl trafficker has made significant Bitcoin payments to one of the precursor suppliers. Alex Peijnenburg was sanctioned by US authorities in November 2022, for selling millions of dollars worth of fentanyl and other drugs to US consumers through online stores. Between March 2019 and May 2020, a wallet controlled by Peijnenburg sent Bitcoin transactions totaling $84,598 to one of the Chinese companies that offered to sell fentanyl to our researchers.

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

It is perhaps surprising that so many of these businesses were willing to accept cryptocurrency payments, despite the Chinese government’s anti-crypto stance. Cryptoasset exchanges are banned from operating in the country, and overseas exchanges cannot service Chinese residents. Despite this, the majority of the chemical suppliers that accepted crypto were using accounts at exchanges based outside of China – all at three specific exchanges. This may also indicate that these businesses use intermediaries to help them convert cryptocurrency payments to renminbi.

This finding suggests that the trade in fentanyl precursors for crypto can be disrupted by the services that act as gateways into and out of cryptoassets. Most crypto exchanges now comply with anti-money laundering (AML) regulations and sanctions, and use blockchain monitoring systems – such as those provided by Elliptic – to ensure that they do not facilitate illicit activity.

Elliptic has notified the exchanges being used by these companies, and have flagged hundreds of crypto addresses in our tools as being linked to this activity. We are monitoring the situation, and will continue our efforts to prevent cryptocurrencies from being exploited by those engaged in this deadly trade.
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mervyn · Jun 1, 2023

More reason to kill the market

semperfrosty · Jun 1, 2023

ph1l said:
When fiat won't function for that felonious transaction, crypto's the cure for that fentanyl fix!
https://www.elliptic.co/blog/chines...c-receive-millions-in-cryptocurrency-payments
More...

Its just testament to the efficacy of crypto not a nod to its misuse.

Given no other choice,they would ship in pallets of cash or gold bars or people or whatever the latest hot commodity was,as payment.

M.W. · Jun 1, 2023

...which would be way easier to monitor and detect.

semperfrosty said:
Its just testament to the efficacy of crypto not a nod to its misuse.

Given no other choice,they would ship in pallets of cash or gold bars or people or whatever the latest hot commodity was,as payment.
More...

Darc · Jun 1, 2023

The Five Eyes (The U.S., U.K., Canada, Australia and New Zealand Intelligence Heads) believe the Chinese Government is supporting Chinese Organized Crime in "enemy Nations".

I assume to weaken and tie up Resources of "enemy Nations".

TheDawn · Jun 1, 2023

"Door to Door Delivery" - Wow!! Chinese efficiency at its best!! So does this mean if we follow the courier we can actually catch the Chinese companies that are supplying the fentanyl precursors?

And why do we need so many painkillers and drugs? We live in the best countries in the world, the best political system where we choose our own leaders, hold them accountable to us and have the freedom to do everything as long as we obey the law, we have the best medical technology and best doctors in the world, WHY are we still in so much pain??!! To the point that we would need such a strong painkiller like fentanyl? The 18-45 age is the prime of one's life when we are the healthiest and strongest. WHY do we need so much painkillers??!! This is what we need to look at.

TheDawn · Jun 1, 2023

Darc said:
The Five Eyes (The U.S., U.K., Canada, Australia and New Zealand Intelligence Heads) believe the Chinese Government is supporting Chinese Organized Crime in "enemy Nations".

I assume to weaken and tie up Resources of "enemy Nations".
More...

Well considering that the Chinese government doesn't give a shit about executing foreign nationals who are actually citizens of another country, we should do the same with members of Chinese organized crime who commit crimes in "enemy nations". There, problem solved and no more tying up resources. We are just way too nice!

mervyn · Jun 1, 2023

TheDawn said:
Well considering that the Chinese government doesn't give a shit about executing foreign nationals who are actually citizens of another country, we should do the same with members of Chinese organized crime who commit crimes in "enemy nations". There, problem solved and no more tying up resources. We are just way too nice!
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yea right, check how many hit series on drug cartels on Netflix, Nacros came to mind, 3 seasons, and Ozark, which I like too.

we glorify the underdogs and the crime bosses alike, addicted to any type of drugs, even pain killers.

remember took nyquil to clubs and got stoned.

TheDawn · Jun 2, 2023

mervyn said:
yea right, check how many hit series on drug cartels on Netflix, Nacros came to mind, 3 seasons, and Ozark, which I like too.

we glorify the underdogs and the crime bosses alike, addicted to any type of drugs, even pain killers.

remember took nyquil to clubs and got stoned.
More...

I know. Unreal!! Reminds of me of this scene in the movie "The Beach" where they were on this paradise beach that's supposed to be the best place on earth and they were most free and happy but they still needed like 10 million things for Leonard Dicaprio to buy from the "real world". LOL

People just need to chill and realize that painkillers do not actually get rid of the pain. To get rid of pain, you need to eat right, sleep well and be nice to people, especially me on ET.

mervyn · Jun 2, 2023

TheDawn said:
I know. Unreal!! Reminds of me of this scene in the movie "The Beach" where they were on this paradise beach that's supposed to be the best place on earth and they were most free and happy but they still needed like 10 million things for Leonard Dicaprio to buy from the "real world". LOL

People just need to chill and realize that painkillers do not actually get rid of the pain. To get rid of pain, you need to eat right, sleep well and be nice to people, especially me on ET.
More...

fentanyl is a pain killer as far as I am concerned, if you don’t have money to buy the real drugs, sure, chemicals are cheaper.