The US Treasury's Office of Foreign Assets Control (OFAC) added crypto wallets from individuals and companies to its Specially Designated Nationals List (SDN) on Tuesday, all linked to the illegal fentanyl trade.
The drug trafficking network, which is primarily based in China, has used various cryptocurrencies to facilitate some operations. Six entities, including five individuals and one company – Valerian Labs – and their digital wallet addresses have now been flagged by the government.
“As part of this action, OFAC identified addresses that received less than $3.8 million worth of cryptocurrency, representing large quantities of drugs that could be trafficked to the United States and other countries,” blockchain intelligence firm Chainalysis wrote in a blog post on the matter.
A total of 17 wallet addresses were identified in OFAC's action, spanning networks including Bitcoin, Ethereum and Tron. Most of the illegal transactions on the latter two blockchains are received through stablecoins – crypto tokens backed by relatively stable fiat currencies such as the US dollar.
In addition to Valerian Labs, the wallets of the five individuals were all hosted by the same centralized crypto exchange and each received “hundreds of thousands of dollars worth of cryptocurrency.” The exchange in question is unknown.
Each wallet received funds from both private wallets and other major exchanges through a long series of small transfers in a “consistent amount”. For Chinalysis, the serial payment method was “indicative of the sale of certain commodities—in this case, fentanyl and related precursor chemicals.”
Crypto-based sales of fentanyl are on the rise worldwide. In May, Chinalysis reported that China-based sellers of fentanyl in 2010 Since 2018, they have published a report showing that they have earned an estimated $37.8 million worth of cryptocurrency.
Although the US Treasury has sanctioned Bitcoin addresses linked to such providers, Tuesday's move is the first to target Bitcoin addresses. Last month, OFAC approved an Ethereum address linked to a member of a Mexican money laundering network that allegedly used crypto to transfer gambling proceeds across borders.
“The sanctions imposed on individuals and businesses associated with this criminal network are an important step in preventing drug traffickers from abusing cryptocurrency, as well as a reminder of the depth of the problem,” Chainalysis concluded.
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