Crime Investigation: Global Drug Cartel Laundered Millions of Dollars Through Binance
Major crypto exchange Binance was reportedly used by a Mexican-based international drug cartel to launder millions of US dollars – and the exchange helped the authorities identify the suspects.
Forbes cited an ongoing investigation by the US Drug Enforcement Administration (DEA), saying that a gang dealing in methamphetamine and cocaine, which operated across countries and continents - specifically, the US, Mexico, Europe, and Australia - used Binance to launder their drug proceeds.
The report said that,
"Between $15 and $40 million in illicit proceeds may have been funneled through Binance, the DEA alleged."
The group in question remains unnamed, but the report cited a search warrant per which it is identified as a Mexican gang. They have allegedly been using Binance since 2020. At the time, several DEA informants using the crypto trade forum localbitcoins.com conversed with a user who offered to exchange crypto for cash.
The method was as follows: the person would send Bitcoin (BTC) or USD coin (USDC) to the seller’s account and then meet in person to take the cash. The trader was identified as Mexican national Carlos Fong Echavarria, who would reportedly claim that the cash came from "family restaurants and cattle ranches."
The DEA went on to surveil the suspected cash couriers, while at the same time, an undercover agent was in direct contact with Echavarria. That way, the agency tracked the money back to drug sales.
Echavarria was arrested last year, and he pleaded guilty to two charges in August: drug dealing and money laundering. He is yet to be sentenced.
Binance helped track the funds
Meanwhile, while Echavarria was being prosecuted, the DEA worked directly with Binance to track his crypto. This is what they found:
- he made 75 transactions made with the undercover agent, totaling $4.7 million;
- an account seemed to be taking money from Echavarria and continuing the laundering process;
- the owner of this other account made 146 crypto purchases in 2021 worth nearly $42 million and sold over $38 million across 117 sell orders;
- at least $16 million of the above sum was derived from drug proceeds;
- the owner of the second account has been identified thanks to the information provided by the exchange and is awaiting charges.
Matthew Price, Binance's senior director of investigations and a former IRS cybercrime agent, was quoted as saying,
"This is actually an example of where the transparency of blockchain transactions works against criminal actors. [...] The bad guys are leaving a permanent record of what they're doing."
The case also shows an operation laundering a notable amount of drug money through crypto wallets, whereas previous investigations into Mexican drug cartels found crypto transactions only in the tens of thousands - not millions. This may suggest that Mexican drug gangs are getting deeper into crypto to try and hide illicit transactions.
However, there is another side of the coin, one noted by Price: authorities are able to track the illegal use of crypto. Therefore, it is likely that the gangs will continue to work with cash and move it in bulk across the border, in an attempt to obscure the trail of money, argued the report.
"On a larger scale, [crypto laundering] is still completely dwarfed by cash and other means just because of the volume of money involved."
In May this year, Binance announced that it worked with the DEA to identify and seize over 100 accounts linked to suspected drug money laundering in Mexico.
However, ironically, as reported earlier in December, Binance and its CEO Changpeng Zhao may be facing charges for money laundering conspiracy and other violations in the US. The charges were reported as just a possibility, with opinions on the matter divided within the US Department of Justice (DOJ), which appeared to be causing a delay in the conclusion of the investigation of Binance and its top executives.
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