Key Points:
- US Treasury’s OFAC adds cryptocurrency addresses to SDN list tied to illegal fentanyl trade.
- China-based drug trafficking network used various cryptocurrencies for its operations.
- Cryptocurrency’s growing role in global fentanyl sales raises concerns.
The US Treasury’s Office of Foreign Assets Control (OFAC) has identified and added more cryptocurrency addresses to its list of specially designated nationals (SDN), all connected to the illegal fentanyl trade, with a focus on China. This network utilized various cryptocurrencies to facilitate its operations, and the government has now flagged six entities and their associated digital wallet addresses, including five individuals and one company called Valerian Labs.
According to blockchain surveillance firm Chainalysis, the addresses targeted by OFAC in this action collectively received nearly $3.8 million worth of cryptocurrency. This represents a significant amount of funds potentially associated with the trafficking of drugs into the United States and other countries.
In total, OFAC’s action identified 17 wallet addresses across different blockchain networks, including Bitcoin, Ethereum, and Tron. Most of the illicit transactions on the latter two blockchains involved stablecoins, which are cryptocurrency tokens backed by stable fiat currencies like the US dollar.
Aside from Valerian Labs, the five individual wallets are hosted on the same centralized crypto exchange, where they each received substantial amounts of cryptocurrency. The specific exchange in question was not disclosed. These wallets received funds through a series of small, consistent transfers from personal wallets and other mainstream exchanges. Chainalysis believes this pattern of consistent payments indicates the sale of specific goods, in this case, fentanyl and related precursor chemicals.
Crypto-based fentanyl sales have been increasing globally. A report by Chainalysis in May revealed that China-based fentanyl sellers had received $37.8 million worth of cryptocurrency since 2018.
While the US Treasury had previously sanctioned Bitcoin addresses associated with such suppliers, this recent action is the first to target addresses on the Tron blockchain. In the previous month, OFAC also sanctioned an Ethereum address linked to a member of a Mexican money laundering network who allegedly used cryptocurrencies to transfer fentanyl proceeds across the border.
Chainalysis concluded that these sanctions against individuals and businesses involved in this criminal network represent a significant step in preventing the misuse of cryptocurrency by drug traffickers and underscore the extent of the issue.
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