OFAC Blacklists ETH Wallet Operated By Cartel for Illicit Drug Trafficking

In a new round of sanctions, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) has added ten more individuals to its blackbook. 

According to a September 26 press release, the US government agency disclosed that many of these individuals were affiliated with an international drug trafficking organization run by the Sinaloa Cartel and other narco traffickers.

Making a surprise appearance on the newly updated list is an Ethereum-backed cryptocurrency wallet, which was allegedly used in transferring illicit funds from drug distribution and trafficking. 

Providing more details, the Department of Treasury stated that the ETH wallet was controlled by Mario Alberto Jimenez Castro, a Mexican national and a member of the Sinaloa Cartel’s Los Chapitos faction.

The indicted subject was said to have been using the virtual currency wallet to launder illicit funds derived from fentanyl sales.

Castro reportedly outsourced cash pickups to US-based couriers. He would then deposit the funds obtained from drug sales into the virtual currency wallet before forwarding them to the Chapitos for continued drug production. 

Besides Castro, nine other Mexican-based nationals were indicted in OFAC’s release, many also linked to the Sinaloa Cartel.

As a result of the sanctions, all individuals have been mandated to forfeit any properties or interests they possess within the North American nation.

Furthermore, businesses where the accused individuals hold a 50% or greater ownership stake in the US are now subject to asset freezes.

According to data from the Ethereum blockchain web search platform Etherscan, the affected crypto wallet holds 0.0178 ETH, which translates to about $28.24 at the current market valuation. 

Applauding the crackdown, Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson was full of praise for the arrests made. 

Nelson stated that this disruption is a testament to the US government’s strong intentions to stop illicit fentanyl trafficking. 

Moreso, Nelson noted that the government is intentional in its commitments towards plugging a hole in the floodgates of illicit drugs entering the country. 

You Win Some, You Lose Others

The US government has become especially interested in the crypto space in the last two years. 

The Department of Treasury previously sanctioned over-the-counter (OTC) cryptocurrency traders who aided the infamous North Korean Lazarus Group in converting millions of dollars worth of crypto to fiat currency. 

According to the statement released in April 2023, three individuals were impacted for “providing material support to the Lazarus Group.” 

However, it has not been smooth sailing for the crackdown on the illicit use of cryptocurrencies by US govt agencies. 

The agency responsible for drug law enforcement reportedly lost $45,000 in Tether to a scam attack known as ‘address poisoning.’ 

According to a Forbes report, the Drugs Enforcement Agency (DEA) seized over $500,000 in cryptocurrencies from two Binance accounts suspected of laundering funds generated from drug sales.

Aiming to transfer these funds to the US Marshals Service, it sent a test amount of $45. A crypto hacker picked up on this and created a wallet address similar to the recipient’s by changing the first five and last four characters of the Marshal’s account. 

He then forwarded a token via airdrop to the DEA to make the crypto address look genuine. 

Following this, the DEA personnel unknowingly forwarded approximately $55,000 to the manipulated address. Unfortunately, the discrepancy was only detected and reported after the funds were withdrawn.

Although the DEA has already sought the assistance of the FBI, the hacker responsible remains at large.