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As the fight against the widespread use of fentanyl continues to grow globally, the need to detect and prevent illegal supply chains has never been greater. Fortunately, with the transparent nature of the blockchain, those who use crypto as a means of payment in this nefarious trade are exposed to the authorities.
While there is still a widespread belief that crypto offers complete anonymity, the reality is that the blockchain records all crypto transactions and can be viewed and investigated by any entity or person with the right tools.
In this blog, we’ll take a look at how blockchain analytics tools work and how they’ve been used to identify the key suppliers driving the illegal fentanyl trade in the US.
What is blockchain analytics?
In simple words, blockchain analytics is the process of analyzing, identifying and “grouping” data on the blockchain, which is a cryptographic distributed ledger accessible to all. Blockchain analytics model and visually represent that data to identify key information about users and transactions. This helps stop illegal activities such as money laundering and fraud.
How it works
A blockchain analytics solution is only as good as its data. To build the required dataset, providers pull information from legitimate and illicit online sources and scour the blockchain for suspicious activity to identify and flag bad actors.
Once a crypto transaction is made, that data is on the blockchain forever. It cannot be changed or deleted. By removing these blockchains, blockchain analytics link crypto transactions to illegal activities through certain markers, such as a crypto wallet previously linked to illegal transactions like drug trafficking or terrorist financing.
Using a blockchain analytics solution, organizations can search the blockchain along with the collected data to instantly identify the risk associated with a particular customer’s source of funds or to get more information about the customer.
In the analysis below, we explain exactly how blockchain analytics helped pull back the curtain on China’s illegal 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 cryptocurrencies means that – somewhat ironically – it is not a good tool for conducting criminal activity. However, this does not prevent bad actors from accepting crypto payments for their illegitimate offers. This was the case when we investigated the illicit fentanyl supply chain.
In China – a country that has completely banned cryptocurrencies – we have identified more than 90 chemical companies willing to supply fentanyl precursor material via cryptocurrency. After engaging with these firms, 90% provided a cryptocurrency wallet address for payment.
Using this information and Elliptic’s blockchain analysis tools, we were able to see the large number of cryptocurrency payments received by these wallets. That numbered in the thousands and amounted to over $27 million, enough to produce fentanyl pills with a street value of $54 billion in the US.
With every transaction recorded and available to the public, only the wallet address of the fentanyl supplier and the right blockchain analysis tools are needed to trace these fund flows. After collecting this information, we were able to investigate further and trace the flow of crypto funds to those who engaged in the past.
This analysis conducted with Elliptic’s blockchain analytics revealed that a known and sanctioned fentanyl dealer – Alex Peijnenburg – made significant Bitcoin payments totaling $84,598 to one of the suppliers.
In this case, you can see how capturing the wallet address of the fentanyl supplier opened the door to further investigation and insight, all emerging with blockchain analytics. The tools not only revealed the true volume of transactions, but also identified some of the individuals involved. This shows exactly how data and tools work seamlessly together to effectively fill knowledge gaps, helping both law enforcement and compliance teams achieve their goals.
This is the real power of blockchain analytics solutions. Technology plays a key role in protecting the crypto ecosystem, reducing criminal activity and helping organizations avoid interacting with bad actors.
If you want to learn more, check out our educational virtual classroom sessions and upskill your team on the key fundamentals and practical value of blockchain analytics.
Alternatively, pre-register for our upcoming ones “Crypto and Fentanyl Monitoring Report” for a full deep dive into the role of cryptocurrencies throughout the supply chain.
