The lab offers drug traffickers a choice: A la carte The menus resemble those of traditional restaurants and leave little room for imagination. Often the products offered are accompanied by a picture, a chemical formula and a price. It's no problem if a substance is prohibited or regulated. It's also no problem if your clients want different options for payment or if you need the goods to be delivered quickly.
“These are typical listings you'd see on Amazon or any digital commerce platform,” says Eric Jardine, lead investigator in the cybercrime division of Chainanalysis, a security firm that specializes in cryptocurrency. Several recent investigations have uncovered the workings of criminal networks trafficking fentanyl and other synthetic drugs internationally. This illicit supply chain reaches from the pharmaceutical industry in China and India to cartels in Mexico to end users in the United States. It even reaches places you'd never think of, like North Africa, Eastern Europe and Oceania. It's all just a click away.
Fentanyl is the latest protagonist in the U.S. war on drugs, which kills tens of thousands of people every year from overdoses. And this time, it's not the same fight as before. Fentanyl is more potent, cheaper and easier to produce than traditional narcotics, which makes the profit margins higher and the process of trafficking the drug in small quantities easier. There are also many recipes available for making fentanyl, many of which are made from substances that are largely legal and easily available. These substances are known as “precursor chemicals.”
Raul Martín del Campo, planning director at Mexico's National Institute of Psychiatry, points out that 10 years ago, there were only four known types of fentanyl. Today, there are more than 50 types of fentanyl on the illegal market that use different precursors. This makes the fight against drug trafficking much more complicated. It is no longer enough to tap phone calls, arrest drug lords and seize goods. In addition, it is now necessary to negotiate with countries on the regulation of commonly used compounds, as well as to monitor how online sales are conducted before the goods reach the black market.
The methods for evading authorities' surveillance are sometimes crude but effective. Jardine's team had brief access to sites on the so-called “deep web,” a part of the internet that offers users a high degree of anonymity and is inaccessible by conventional means, where US traffickers sell fentanyl under the pseudonym “China White.” The drug is well known on the streets. For example, one webpage sells a gram of “high-quality” fentanyl for $100, with delivery from the US to anywhere in the world. If a customer buys 10 grams, they get a 10% discount, so they pay just $900.
Just three grams of fentanyl can be lethal. But the business model is solid: US authorities calculate that drug lords spend about $800 to produce a kilo of fentanyl. But on the street, they can make more than $1 million for the same amount of drug.
These products are not usually advertised under generic names. Instead, vendors use scientific formulas and offer a variety of suppliers, especially when it comes to precursor chemicals. Chainalysis' latest research includes screenshots of websites where customers are presented with three options of different origins and purity, ranging from one gram to 25 kilograms. Waiting times range from five days to one week. Buyers can view reviews of manufacturers posted by other customers and participate in bids to get the goods.
Jardine points out that there is a wide variety of online stores selling these products. Companies try to allay doubts by using traditional marketing techniques such as search engine optimization (SEO) and customer service. “Generally, and from what we have observed, these services are not trying to hide what they are selling,” the expert explains.
Elliptic, another company specializing in cybersecurity and cryptocurrency, identified more than 90 Chinese pharmaceutical companies willing to sell precursor chemicals containing substances that are regulated in other countries (but legal in China). Seventeen of them sell finished fentanyl without regulation. During the investigation, Elliptic employees posed as Mexican drug traffickers so they could deal directly with the pharmaceutical companies. “Suppliers didn't care what the chemicals were used for… Some would explain that this or that precursor was legal in China. [chemical] “This drug is one of their best sellers and can be used to manufacture fentanyl. Other companies have publicly stated they have already sold it to customers in Mexico,” the company said in its latest filing.
Deals are sometimes agreed over email, discussing product details and delivery costs, including the possibility of door-to-door delivery of chemicals. Last week, the US Treasury Department blacklisted 17 Chinese nationals and companies for supplying drug cartels with key materials, such as tablet presses, used to make smuggled drugs.
Beijing has issued a stern statement in response to Washington's assertion that Asia is the epicenter of the global fentanyl trade, highlighting the allegations as a classic example of a “Hollywood-style conspiracy.”
“A knife can be used to cut vegetables or to kill someone. If someone attacks another person with a knife, who is to blame? The one who uses the knife or the one who makes the knife? The answer is clear,” said Mao Ning, a spokesman for China's foreign ministry. China claims it has made progress in regulating chemical sales but insists it is not responsible for problems with “Made in America,” in Ning's words.
Funding
According to expert studies, scenes like those in Hollywood movies, where briefcases full of cash are delivered to close a deal, are becoming more and more common. That's where cryptocurrencies come in. Criminal groups turn to cryptocurrencies because they are free of government oversight and can be sent instantly anywhere in the world by using pseudonyms instead of real names. According to Chainalysis calculations, cryptocurrency transactions related to illegal and criminal activities will exceed $20 billion in 2022, up $2 billion from the previous year.
When DEA agents infiltrated the Sinaloa Cartel, they found that the use of cryptocurrencies allowed drug lords to move millions of dollars without being detected by the financial system. All of these illegal funds can later be easily converted into traditional currencies. According to Elliptic's research, nine out of 10 Chinese laboratories selling fentanyl or its precursors accept payment in cryptocurrencies. Despite restrictions on the use of these platforms in China, pharmaceutical companies use open portfolios in other countries or rely on intermediaries to facilitate operations. According to the company, “Bitcoin was by far the most popular cryptocurrency” among the laboratories analyzed, followed by Tether, a cryptocurrency that has become increasingly popular because it has a fixed exchange rate equivalent to one US dollar.
Although cryptocurrencies are shrouded in a veil of secrecy, Jardine explains that transactions are traceable. “There's a misconception that cryptocurrencies are inherently private and that no one knows who's behind them, but that's not true,” Jardine emphasizes. According to experts, in a series of blocks there is a kind of ledger that is a record of all transactions. “The tricky thing is that the payment addresses that we see are just a string of characters… [they’re not identifiable] In the real world, the whole process would have some degree of anonymity.”
What cybersecurity companies do is overlay known data from these addresses and digital wallets, which can tell them more about who is behind the transactions and what the funds are being used for. For example, payment references can be linked to specific laboratories, allowing specialist companies to track each lab's operations, trace the flow of funds and identify accounts conducting similar activity.
A small number of users linked to Chinese laboratories have generated more than $38 million in commercial revenue over the past four years. The main customers of online stores selling fentanyl and synthetic drug ingredients are in North America, where consumption is highest. However, Chainalysis' regional breakdown shows millions of dollars in cash flow from Europe, Asia, Oceania, Latin America, and Africa. However, the company does not have access to purchase orders, so it cannot be known for certain whether all operations are related to fentanyl trafficking. Another verification strategy would be to track purchases of precursor chemicals from laboratories in other countries and sales of chemical products commonly used in the manufacture of fentanyl.
Meanwhile, Elliptic detected $27 million in transactions to more than 90 Chinese laboratories allegedly working with the cartels. Researchers assert that cash flows increased 450% year-over-year, reflecting a surge in fentanyl trafficking and consumption. To put this into perspective, the company points out that if the $27 million had only been used to purchase chemical raw materials, it would have been enough to produce $54 billion worth of fentanyl pills at street value.
The paradox is that these estimates are only possible because the trade is traceable, but the most startling calculations take into account not only the huge profit margins, but also the enormous cost in terms of human lives: According to official statistics, the fentanyl epidemic kills about 200 people every day in the United States.
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