Crypto: the flow of money in chemical stores revealed by Chainalysis

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According to a report by Chainalysis, in the last seven years, chemical stores suspected of having connections to drug trafficking have received a total of 250 million dollars in crypto.

The document claims to have identified thousands of wallets associated with illegal producers of narcotics ingredients. Let’s see all the details below.

Summary

• Chainalysis: suspected links between chemical stores and crypto transactions
• New and old discoveries by Chainalysis
• The decrease in criminal activities with crypto according to Chainalysis

Chainalysis: suspected links between chemical stores and crypto transactions

As anticipated, since 2015, stores selling chemicals suspected of being linked to illegal narcotics networks have received a total of $250 million in crypto, according to a recent report by Chainalysis.

The document reveals that a quarter of a billion dollars in cryptocurrencies flowed into digital wallets associated with suspected chemical shops between July 2015 and February 2024.

From the total sum, Chainalysis claims that about 100 million dollars have been allocated to drug production facilities in China.

The recipients of the transactions, according to Chainalysis, are chemical precursor stores or drug production sites. In particular, these process crucial ingredients for the production of illegal narcotics, such as fentanyl and heroin.

The latest report includes thousands of previously unidentified wallets with connections to chemical substance stores, as stated by the research company in a press release.

This set of data includes both exchange deposit addresses and various unique services and wallets on the chain.

The current Chainalysis report identifies a higher dollar amount for suspicious transactions related to drugs compared to the estimates reported in its previous year’s report.

New and old discoveries by Chainalysis

In the 2023 report, Chainalysis estimated that nearly 38 million dollars in digital tokens had flowed into wallets belonging to chemical precursor stores between January 2018 and April 2023. This using a more limited dataset.

It is not clear whether the latest discoveries by Chainalysis reflect an increase in cryptocurrency transactions related to drugs.

Or if the apparent increase in flows towards drug-related portfolios is the result of the company’s decision to analyze a greater number of portfolios for a longer period this year.

Tracking digital funds linked to the illicit production of narcotics is difficult due to the secretive nature of the illegal drug trade.

In 2019, China was identified as the largest global producer of fentanyl precursors, according to a report from the Drug Enforcement Administration (DEA).

Since then, the DEA has been pressuring China to shut down the networks of chemical precursors, which it claims fuel the illegal drug trade.

Last October, eight Chinese pharmaceutical companies and their employees were indicted by federal officials for drug-related crimes.

The decrease in criminal activities with crypto according to Chainalysis

According to another new Crypto Crime Report 2024 by Chainalysis, the amount of funds sent to illicit addresses in 2023 indicates a decrease in cryptocurrency-based criminal activities.

The value received from illicit cryptocurrency addresses dropped to $24.2 billion last year. This is in contrast to the $39.6 billion recorded in 2022, as highlighted in the market intelligence report.

Chainalysis specifies that the figures could still undergo variations, as funds sent to addresses not yet identified as illicit have not been fully accounted for.

The report highlights a 29.2% decrease in revenue from fraud, while ‘romantic’ fraud tactics have seen a wider spread.

“Romantic scams, in particular, have grown significantly in 2023, more than doubling revenues year after year. Our data suggests that romantic scam activity has grown 85 times since 2020.”

Chainalysis highlights the concern for the increasing number of ‘romantic’ scams, as they have the worst impact on victims based on the average payment amount.

‘Romantic’ scams are also more difficult to identify, as scammers target individuals rather than the masses.

“We still believe that investigations into romantic scams, in particular, are underestimated. We hypothesize that the true damage of scams is greater than what is shown in FBI reports and our on-chain parameters.”

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