Chinese Laboratories Are Selling Fentanyl Ingredients For Millions In Cryptocurrency

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Despite that trend away from dark web sales of fentanyl, four members of the US Congress this week reintroduced a bill called Dark Web Interdiction Law to increase sentences for dark web drug dealers, specifically targeting fentanyl. The bill would also strengthen and make permanent the joint criminal opioid and dark web enforcement task force that has helped coordinate police takedowns of hundreds of suspected dark web drug dealers and administrators in recent years.

But even as cryptocurrency retailing of fentanyl on the dark web has been restricted, and law enforcement cracking down on what remains, Elliptic’s research shows that cryptocurrency-based wholesale of fentanyl ingredients to cartels drug dealers, who then manufacture the synthetic opioid and smuggle it into the US and other countries for sale in the physical world—continues. In its study of chemical labs selling precursor chemicals, Elliptic notes that several of the websites surveyed specifically mentioned shipping to customers in Mexico, and 17 of the labs also sold finished fentanyl and other, even more powerful opioids.

Those Chinese chemical companies in some cases sell products other than fentanyl precursors, notes Elliptic’s Robinson, acknowledging that blockchain analytics cannot differentiate between those sales and sales of fentanyl ingredients. Some also sold precursors to amphetamines, methamphetamines, and other opioids. But Elliptic researchers did see companies advertising fentanyl precursors as their best-selling product, in some cases. Robinson also notes that Elliptic does not claim to have measured the entire crypto-based fentanyl supply chain, but only took a “snapshot” of the transactions it was able to identify. This suggests that their estimate of $27 million is likely lower than the total amount of fentanyl precursor sales over the past half-decade.

The US government may be increasingly aware of the activity of fentanyl precursor sellers in China and the role of cryptocurrency, but so far the US has acted on a much smaller scale than the industry that Elliptic has discovered. The United States Department of the Treasury last month sanctions imposed against four Chinese men and two chemical laboratories, Wuhan Shuokang Biological Technology and Suzhou Xiaoli Pharmatech, for selling fentanyl precursors to drug cartels in Mexico. Three of the men were also charged in absentia. The fourth, according to the Treasury announcement, was an associate who had accepted cryptocurrency payments on behalf of one of the two companies.

The decision by Chinese chemical companies to accept cryptocurrency for their sales of fentanyl ingredients may seem counterintuitive, given the ability of companies like Elliptic and other cryptocurrency tracking companies to track sales of dangerous and potentially illegal products through of block chains. But Robinson says Chinese companies are likely to use cryptocurrency because it’s hard to seize or block, and they may not particularly care that Western companies and law enforcement can track the money, as long as they can find a cryptocurrency exchange. willing to collect it. outside. “If a company in China wants to accept crypto payments, no one can stop that from happening,” says Robinson.

But traceability also creates an opportunity to pressure cryptocurrency exchanges to hack the accounts of the fentanyl precursor sellers that Elliptic has identified. Elliptic, in fact, reported exchanges of hundreds of addresses linked to Chinese chemical companies. “Definitely, those services have a role to clamp down on this,” says Robinson. And exploiting that cryptographic chokepoint could perhaps cut off at least a fraction of the lethal flow of fentanyl around the world, not at its destination, but at its source.