US DoJ seizes $54M in crypto from drug dealers, more here

Drug Trafficking and Crypto: Combating Illicit Transactions

Over the years, drug trafficking actors have continuously adapted to technological advancements, and this includes utilizing both centralized exchanges (CEXs) and darknet markets (DNMs) for their illicit sales. The implications of these activities are not only concerning from a legal standpoint but also highlight the need for enhanced efforts to combat crypto-enabled illicit activities.

Seizing Crypto from Drug Ring

In a recent development, the US federal officers successfully seized crypto assets worth $54 million from a drug ring based in New Jersey. The group of convicted drug dealers, known for their operations between 2010 and 2015, held wallets containing laundered crypto assets.

The investigation revealed that the criminals employed various cryptocurrencies, including bitcoin (BTC), ethereum (ETH), and ethereum Classic (ETC), to transfer their illicit proceeds. The ringleader even went as far as planning to launder 30,000 ETH outside of the United States, discussing potential destinations such as the Bahamas.

This seizure, according to FBI–Newark Special Agent in Charge James Dennehy, serves as a clear message to those underestimating law enforcement’s ability to trace their illegal activities and seize their ill-gotten gains.

Darknet Markets: A Hub for Illicit Crypto Transactions

The utilization of cryptocurrencies in illicit drug trafficking is a growing concern. A report published by blockchain analytics firm TRM Labs highlights the significant role of darknet markets (DNMs) in facilitating crypto-mediated drug trades.

In 2022, DNMs witnessed transactions valued at $1.49 billion, with over 80% of these occurring on Russian-language DNMs. Notably, the majority of illicit trading on these platforms involved drug sales, emphasizing the intertwining relationship between the dark web and drug trafficking activities.

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Another analytics firm, Elliptic, provided insights into the usage of centralized exchanges (CEXs) for illegal drug sales. The firm discovered around $32 million worth of crypto assets, primarily consisting of BTC and Tether (USDT), in CEX wallets linked to drug dealers in 2023. This finding sheds light on the concerning growth of illicit activities occurring through regulated crypto trading platforms.

Moreover, Elliptic’s research indicates a staggering 450% year-on-year increase in the number of individual payments involved in these illicit transactions, further highlighting the scale of the issue.

Disposing of Seized Crypto Assets

Following the seizure of crypto assets from criminal operations, the US government faces the challenge of appropriately disposing of these confiscated funds. Generally, the U.S. Marshals Service conducts auctions to convert the seized crypto assets into fiat currency. The proceeds are then allocated to victims or deposited into government treasuries.

However, it is worth noting that the US government has been slow to convert its seized bitcoin into dollars. According to The Wall Street Journal, the government currently holds around 200,000 BTC, estimated to be worth $6.69 billion after the recent bull run. This highlights the potential magnitude of unconverted seized crypto assets and raises questions about the government’s strategy for managing such holdings.

As the crypto landscape evolves, it is crucial for law enforcement agencies and regulators to continue adapting their approaches to combat the usage of cryptocurrencies in illicit activities. By enhancing investigative techniques, implementing stricter regulations, and promoting global cooperation, we can collectively work towards safeguarding the legitimate use of cryptocurrencies while effectively deterring criminal activities.

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