A methamphetamine and cocaine gang operating across the U.S., Mexico, Europe and Australia used the world’s biggest cryptocurrency exchange Binance to launder tens of millions in drug proceeds, according to an ongoing investigation by the US Drug Enforcement Administration. Between $15 and $40 million in illicit proceeds may have been funneled through Binance, the DEA alleged.
The previously-unreported case provides rare insight into how Mexican-based narcotics dealers are increasingly looking to cryptocurrency as a means to obscure illicit business transactions. At the same time, it shows federal agencies moving to track illegal use of cryptocurrency – once touted as untraceable – and how closely they work with exchanges like Binance to track organized crime (though Binance itself is facing a federal probe over concerns about money laundering on its platform).
According to a search warrant obtained by Forbes, the investigation into the unnamed Mexican gang’s use of Binance began in 2020 when multiple DEA informants using localbitcoins.com, a crypto trade forum, interacted with a user offering to exchange cryptocurrency for cash. The transaction appeared to be simple: send Bitcoin or USDC (a “stablecoin” whose value is pegged to the U.S. dollar) to the seller’s account and then meet him or a contact to collect the cash in person. The trader – Mexican national Carlos Fong Echavarria – told them the cash came from “ family restaurants and cattle ranches,” according to the government’s account.
This is actually an example of where the transparency of blockchain transactions works against criminal actors.Matthew Price, senior director of investigations at Binance
By surveilling the alleged couriers of the cash, and having an undercover agent deal directly with Echavarria, the DEA said it tracked the money back to drug sales. In August, Echavarria, who was arrested last year, pleaded guilty to two charges, one of drug dealing, the other of money laundering. He awaits sentencing.
The DEA’s investigation continued during his prosecution. With assistance from Binance, the agency tracked Echavarria’s crypto across 75 transactions he made with the undercover agent, totalling $4.7 million. One account appeared to be taking money from Echavarria and continuing the laundering process, the DEA said. In 2021, the owner of that account made 146 purchases of cryptocurrency worth nearly $42 million and sold over $38 million across 117 sell orders, according to the warrant. The DEA said it believed at least $16 million of that was derived from drug proceeds. It didn’t offer any explanation for the source of the remaining funds.
Thanks to information provided by Binance, the DEA was able to identify the owner of that second account. Though he’s named in the warrant, Forbes is withholding his name from publication as he is yet to be charged.