1686579166 Cryptocurrencies Drugs and Precursors The Menu of the International Fentanyl

Cryptocurrencies, Drugs and Precursors: The Menu of the International Fentanyl Trade

The labs put the options on the table for the traffickers. It is an à la carte menu, similar to that of old restaurants, which leaves no doubt about the imagination. The products are often accompanied by a photo, the chemical formula and the price to be paid. If the substance is banned or regulated, that’s not a problem. If the customer wants to have several payment options or wants the goods to be delivered immediately, this is not the case either. “These are the typical lists you would find on Amazon or any other digital trading platform,” said Eric Jardine, chief investigator in the cybercrime division at Chainanalysis, a security firm specializing in cryptocurrencies. Several recent studies have uncovered how criminal networks operate for the international trafficking of fentanyl and other synthetic drugs, a network that includes the pharmaceutical industries in China and India, Mexican cartels and consumers in the United States. It even reaches unexpected areas like North Africa, Eastern Europe or Oceania. Everything accessible with one click.

Fentanyl is the new protagonist in the war on drugs in the United States, where drug overdoses kill tens of thousands of people each year. It’s not a fight like the previous ones. This drug is more potent, cheaper, and easier to manufacture than traditional narcotics, which translates into higher profit margins and is easier to transport for criminal groups in small doses. However, there is an additional difficulty: there are many recipes for making it, and many of them rely on substances that are mostly legal and easy to obtain, called precursors.

On August 25, 2022 in Los Angeles, a man injects Narcan into a woman who has overdosed on fentanyl to revive her.A man injects Narcan into a woman who has overdosed on fentanyl in Los Angeles on August 25, 2022 to revive her. Jae C Hong (AP)

Raúl Martín del Campo, director of the National Institute of Psychiatry in Mexico, points out that ten years ago only four different types of fentanyl were known and there are now more than 50 variants on the illicit market using different precursors. This has made the fight against drug trafficking much more complex. It is no longer just a matter of intercepting phone calls, arresting drug lords and confiscating the goods, it is now necessary to negotiate with other countries to regulate commonly used chemical compounds and to look at how sales processes are triangulated before they are sold become a reality black market.

Sometimes the methods of staying unnoticed on the authorities’ radar are crude but effective. Jardine’s team easily got to pages on the so-called deep web, a part of the internet that cannot be accessed by traditional means and guarantees users anonymity, where US distributors offer fentanyl under the pseudonym “China White,” as the drug is known common knowledge on the street. For example, one of the sites sells a gram of “high quality” for $100 and ships it from the United States to anywhere in the world. If the customer takes 10 grams, there is a discount, he only has to pay 900 dollars. Three grams of fentanyl can be deadly. But business is round. US authorities have calculated that it costs drug lords about $800 to produce a kilo of fentanyl, but fetches more than $1 million on the street for the same amount of drug.

A A “menu” sent to Elliptic researchers detailing the precursor chemicals to fentanyl and their prices.ELLIPTIC

The products are usually not advertised with commonly used names, but scientific formulas and the selection of different suppliers are given, especially when it comes to preliminary products. The latest Chainanalysis study includes a screenshot of a website with three options offered to the customer, varying in purity, origin, presentations from one gram to 25 kilos, waiting times from five days to a week, resold or homemade. The buyer can bid with others for the price and has reviews of other customers on the manufacturers at hand. Jardine says there are all kinds of shops. To dispel doubts, companies resort to traditional marketing tactics such as search engine optimization (known as SEO) or customer service. “In general, and from our observations, these services don’t really try to hide what they’re selling,” says the specialist.

Elliptic, another cybersecurity and cryptocurrency firm, identified more than 90 Chinese pharmaceutical companies willing to sell precursors, including substances regulated in other countries but legal in China. Of these, 17 sold ready-made versions of fentanyl without restrictions. Company employees posed as Mexican drug dealers in order to deal directly with drug manufacturers. “The suppliers didn’t worry about what the chemicals were going to be used for. Some even stated that this precursor was one of their best sellers and could be used to make fentanyl. Others openly said they had already sold it to customers in Mexico,” their latest report reads.

A website found by Chainalysis presents the customer with three options with different levels of purity, origin and presentation.A website found by Chainalysis presents the customer with three options with different degrees of purity, origin and presentation.Chainalysis

Sometimes transactions are agreed by email, giving details of the product’s characteristics or shipping costs, and the possibility of door-to-door delivery of the product is considered to avoid suspicion. The Treasury Department last week “blacklisted” 17 Chinese people and companies on the grounds that they provided drug cartels with equipment such as presses to make contraband pills.

Following Washington’s insistence that the epicenter of the global fentanyl trade is in Asia, Beijing said in a statement that the allegations were typical of “a Hollywood movie-style storyline.” “A knife can be used to cut vegetables or to kill a person. Who is liable if someone attacks others with a knife? The one who used the knife or the one who made it? “The answer is clear,” said Mao Ning, a spokesman for China’s foreign ministry. The country defends that it has made progress in regulating the sale of chemicals but insists it will not take responsibility for, as Mao put it, a problem “made in the USA”.

the money trail

Specialized studies suggest that Hollywood scenes in which briefcases full of money are delivered to close deals are becoming less common. This is where cryptocurrencies come into play. Criminal groups resort to them because they allow instant payments to any part of the world and using pseudonyms without the need for surveillance by any country’s authorities. In 2022, cryptocurrency transactions related to illegal and criminal activities exceeded $20 billion, up $2 billion from the previous year, according to Chainanalysis calculations.

When DEA agents infiltrated the Sinaloa cartel, they witnessed how the use of cryptocurrencies allowed millions of dollars to be moved without the money being detected by the financial system, and later easily converted into traditional currencies. According to the Elliptic study, nine out of ten Chinese labs that sell fentanyl or its precursors accept cryptocurrency payments. Despite the fact that the use of these platforms is restricted in the Asian country, pharmaceutical suppliers used open portfolios in other countries or resorted to intermediaries to triangulate their deals. The company states that “Bitcoin is by far the most popular cryptocurrency” among the analyzed labs, followed by Tether, a currency that has gained popularity because it has a fixed exchange rate equal to one dollar.

Despite the halo of secrecy surrounding cryptocurrencies, Jardine states that transactions are traceable. “There is a misconception that cryptocurrencies have inherent privacy and that nobody knows who is behind these operations, but that is not the case,” he says. The expert says there is a kind of ledger, a record of all transactions on a blockchain. “The difficult thing is that the payment addresses we see are just a collection of characters and it’s not a real-world identity, so there’s a level of anonymity in the whole process,” he adds.

This map, designed by Chainalysis, shows the global money flow in cryptocurrency transactions to Chinese chemistry labs.This map designed by Chainalysis shows the global flow of money in cryptocurrency transactions to Chinese chemistry labs.Chainalysis

Cybersecurity companies overlay known data on these addresses or payment wallets, allowing them to learn more about who is behind these transactions and what the money is being used for. For example, once the payment references are associated with a laboratory, specialized companies can follow each of their operations and have programs for geolocation of cash flows or tools that allow them to find accounts with similar activities.

Just a handful of users associated with Chinese labs have seen commercial inflows of more than $38 million over the past four years. The main customers for online shops selling fentanyl or substances used in the manufacture of synthetic drugs are in North America, the region with the highest consumption. However, according to Chainanalysis’ regional breakdown, there are also millionaire flows to Europe, Asia, Oceania, Latin America and Africa. However, the company does not have access to the orders and cannot know for sure if all operations are related to the fentanyl trade itself. One of the hypotheses is that they can also capture the purchase of supplies from laboratories in other countries or the sale of commonly used products.

For its part, Elliptic uncovered $27 million in transactions to more than 90 Chinese labs found to be collaborating with the cartels and asserted that flows had grown 450% year over year, also a mirror image of the sharp increase in consumption and traffic. To put its findings in perspective, the company says that if that $27 million was spent just buying precursors, it would be enough to produce $54,000 million in fentanyl pills at street prices.

The paradox is that these estimates are possible because the processes are traceable. The most staggering calculation takes into account not the enormous profit margins, but the enormous cost in human life. According to official figures, around 200 people die every day from the fentanyl epidemic in the USA.

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