OFAC Sanctions Chinese Druglords Using Bitcoin For Money Laundering

The Office of Foreign Assets Control (OFAC), acting under the Foreign Narcotics Kingpin Act, has sanctioned three Chinese drug lords and their crypto addresses. It is alleged they broke laws related to drug smuggling and money laundering.

Fueling the Opioid Crisis

 The US Treasury charged Fujing Zheng, Xiaobing Yan, and Guanghua Zheng as “significant narcotics traffickers” and froze their properties within U.S. jurisdiction. Their email aliases and passport details and citizen numbers have also been frozen. The Treasury Department also listed their Bitcoin and Litecoin addresses.  

According to a press release issued by the department, the three Chinese nationals ran an international drug trafficking operation that contributed directly to the crisis of opioid addiction, overdoses, and death in the United States. “Zheng and Yan have shipped hundreds of packages of synthetic opioids to the U.S., targeting customers through online advertising and sales, and using commercial mail carriers to smuggle their drugs into the United States,” stated Sigal Mandelker, Under Secretary for Terrorism and Financial Intelligence.  An official of the Treasury Department said that the kingpins identified ran an international network that sells fentanyl, a dangerous synthetic narcotic that has contributed to the opioid epidemic. The press release added that these criminals had smuggled hundreds of packages of opioids to US consumers through online ads and via commercial courier services.

Bitcoin was used to launder earnings from their illicit drug trafficking operation. “The Zheng DTO…transmitted drug proceeds into and out of bank accounts in China and Hong Kong, and bypassed currency restrictions and reporting requirements,” the release states.

Second Instance of Crypto Crime Using Bitcoin

OFAC worked with the Financial Crimes Enforcement Network and various local agencies, such as the US Attorney’s Office for the Northern District of Ohio and the US Attorney’s Office for the Southern District of Mississippi, to bust the drug operation.

This is the second time that the Treasury Department has directly addressed money laundering using cryptocurrencies. The last time it took action was when the agency accused two Iranian nationals of taking part in ransomware schemes. According to a study conducted by research firm Chainalysis, the use of cryptocurrencies in illicit has declined considerably over the years. As of June 2019, only two percent of crypto activity could be classified as illicit.

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