In late August, the US Department of the Treasury announced that its Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) arms were targeting a drug trafficking gang led by a Chinese national named Zheng Fujing. As part of that operation, Treasury officials identified Bitcoin addresses associated with the gang and moved to seize them.
Zheng’s gang is allegedly responsible for the manufacturing and trafficking of a variety of drugs into the United States, including fentanyl. And according to a LongHash analysis of the Bitcoin addresses the Department of Treasury says are associated with the gang, it appears to have moved huge amounts of money using Bitcoin.
Drilling down into these addresses, and using the common-input-ownership heuristic as an assumption, LongHash found a broader pool of 3,054 Bitcoin addresses that we believe were likely held by or associated with Zheng’s gang. Most of these accounts have been cleared out and currently hold zero balance, but our analysis shows that the total amount transferred to addresses in this pool is 17,526 BTC. As of this writing, that much Bitcoin is worth over US$177 million.
Of course, it’s unlikely that the gang was held all that money in Bitcoin, and due to the token’s frequent fluctuations, it’s difficult to say precisely how much the gang actually took in USD. However, the account pool’s most active period was between August and December 2017, at a time when Bitcoin’s price was rocketing up to its all-time-high. Depending on when and if the gang cashed out, its Bitcoin take might have been even more than US$177 million.
Some of the addresses in the gang’s pool were exchange wallets. For example, the traffickers apparently held this account on Bitfinex, and these accounts on Bitstamp. They also appear to have done at least some business via the notorious “dark web” Silk Road market prior to its shutdown, as evidenced by this transaction.
It’s worth pointing out that this scale of criminal activity on Bitcoin is believed to be quite rare. Although criminals are expected to spend US$1 billion in Bitcoin on the dark web this year, according to analysis firm Chainalysis, the proportion of spent Bitcoin that’s going towards illegal services is declining. Hannah Curtis, senior product manager at Chainalysis, said that only 1% of bitcoin transactions were related to illegal activities this year, which has reduced compared with 7% in 2012.
