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Justice Department says China-based firms and employees used crypto to distribute drugs

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The U.S. Department of Justice cracked down on several China-based companies and their employees for producing and distributing fentanyl among other drugs, noting that cryptocurrency was used to conceal identities and funds. 

The Justice Department said China-based companies and their employees were involved in the production of fentanyl and methamphetamine, distributing synthetic opioids and resulting in sales “from precursor chemicals,” in a statement on Tuesday. 

“These China-based chemical companies often attempt to evade law enforcement by using re-shippers in the United States, false return labels, false invoices, fraudulent postage, and packaging that conceals the true contents of the parcels and the identity of the distributors,” officials said. “In addition, these companies tend to use cryptocurrency transactions to conceal their identities and the location and movement of their funds.”

Distribution in the U.S.

Authorities seized 1,000 kilograms of “fentanyl-related precursor chemicals,” and officials said they also tracked packages containing the chemicals through the U.S. mail. China-based manufacturers ship fentanyl and methamphetamine “precursors, opioid additives, and synthetic opioids” globally, where drug cartels and others mix the chemicals and then distribute the drugs in the U.S., officials said. 

“We know that the global fentanyl supply chain, which ends with the deaths of Americans, often starts with chemical companies in China,” said Attorney General Merrick B. Garland, in a statement. “The United States government is focused on breaking apart every link in that chain, getting fentanyl out of our communities, and bringing those who put it there to justice.” 

Fentanyl is the leading cause of death for people in the U.S. from ages 18 to 49, according to the DOJ’s statement. “From February 2022 to January, at least 105,263 Americans died of drug overdoses, the majority of which involved synthetic opioids such as fentanyl and fentanyl analogues,” it said. 

Cracking down on crypto

Other officials too have cracked down on the use of crypto to distribute drugs. The Department of the Treasury’s Office of Foreign Assets Control sanctioned a member of Mexico’s Sinaloa Cartel last week, saying it used an Ethereum wallet to move funds connected to the smuggling of fentanyl into the U.S. 

Lawmakers in the U.S. have voiced their concerns over the use of crypto in money laundering and drug trafficking. Sen. Elizabeth Warren, D-Mass., with backing from Sen. Joe Manchin, D-W.Va.., Sen. Roger Marshall, R-Kan., and Lindsey Graham, R-S.C., introduced a bill in July to bring crypto into compliance through tightening money laundering and know-your-customer rules. 

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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