How blockchain analytics uncovered China’s illicit fentanyl trade
How it works
A blockchain analytics solution is only as good as its data. To build the dataset needed, providers scrape information from legitimate and illicit online sources, and scour the blockchain for suspicious activity to identify and label bad actors.
When a crypto transaction is made, that data is forever on the blockchain. It can’t be altered or erased. Through the scraping of these blockchains, blockchain analytics ties crypto transactions to illicit activity through certain signifiers, such as a crypto wallet previously linked to illicit transactions like drug smuggling or terrorist financing.
Using a blockchain analytics solution, organizations can search the blockchain in conjunction with the data collected to instantly identify the risk associated with a given customer’s source of funds or to gain more information on a beneficiary.
In the analysis below, we explain exactly how blockchain analytics helped peel back the curtain on China’s illicit fentanyl supply chain and outline the true power of the technology’s capabilities.
Blockchain analytics in action: uncovering China’s fentanyl trade
The inherently transparent nature of crypto means that – somewhat ironically – it is not a good tool for conducting criminal activity. Yet this doesn’t stop bad actors from accepting crypto payments for their illegitimate offerings. This was the case when we investigated the illicit fentanyl supply chain.
In China – a country that has banned crypto outright – we identified more than 90 chemical companies willing to supply the precursor material of fentanyl via cryptocurrency. Following engagement with these firms, 90% provided a cryptocurrency wallet address for payment.
Leveraging this information and Elliptic’s blockchain analytics tools, we were able to see the extensive number of cryptocurrency payments these wallets had received. This numbered in the thousands and totalled over $27 million in value, enough to produce fentanyl pills with a US street value of $54 billion.
With every transaction recorded and available to the public, tracing these fund flows just required the fentanyl supplier’s wallet address and the right blockchain analytics tools. Once we captured this information, we were able to investigate further and follow the flow of crypto funds to those who had engaged in the past.
This analysis conducted with Elliptic’s blockchain analytics revealed a known and sanctioned fentanyl trafficker – Alex Peijnenburg – had made significant Bitcoin payments, totalling $84,598 to one of the suppliers.
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