On a hazy afternoon in May 2021, Daniel Gonzalez, alias “Rafael Arocho,” sped through Pasadena in a white Lexus packed with about $600,000 in cash — drug profits bound for a handoff at a San Gabriel Valley stash house in southern California.
A few miles away, a Chinese money broker known as “Dr. P” had been hired by a Sinaloa Cartel intermediary to convert the cash into cryptocurrency and push it through a digital maze to clients in Mexico.
But that day, US federal agents were tailing Gonzalez. He tried to flee, ramming the Lexus into an SUV driven by Drug Enforcement Administration (DEA) agents before being pulled out alongside 46 sealed bundles of cash.
Dozens of similar busts rippled across Los Angeles and then Miami, where authorities uncovered another crypto-laundering crew tied to Mexican and Colombian drug trafficking groups.
The trail resurfaced in New York, where investigators watched a courier haul a trash bag stuffed with $100,000 and feed bills into Brooklyn ATMs.
Following the money online led them to cartel wallets, and from there, to an unexpected destination: China-based suppliers of chemical precursors used in fentanyl production.
An exhaustive review of recent US court cases and blockchain data reveals an industrial-scale crypto laundering pipeline moving dirty cash through digital networks to Chinese chemical suppliers sustaining Mexico’s synthetic drug trade.
Criminal Crypto Boom
In the 2010s, crypto lived mainly on darknet marketplaces, which were “completely unregulated spaces,” according to Helena Margarido, a blockchain researcher and Chief Operating Officer at FinTech School, a learning platform focused on financial services innovation.
Traffickers largely avoided crypto’s price swings and traceable transactions, sticking instead to cash smuggling, trade-based laundering, and front businesses.
But by 2018, the landscape had shifted. Loosely regulated peer-to-peer exchanges allowed users to trade crypto anonymously with minimal identity checks. Dollar-pegged stablecoins like Tether provided stability. And “mixers” obscured transactions by splitting, pooling, and shuffling tokens across multiple wallets or blockchains.
SEE ALSO: How Criminal Groups Have Adapted to the Digital Age
These anonymity tools lowered barriers to criminal adoption even as authorities intensified surveillance of offshore accounts, shell companies, and bulk cash smuggling.
Illicit crypto inflows surged, quadrupling after 2020 to reach an estimated $40-51 billion in 2024, according to Chainalysis, a company that provides data analytics tools focused on cryptocurrency transaction monitoring and blockchain investigation. Nearly one-quarter of that total stems from what the firm labels “illicit-actor organizations” such as transnational criminal networks.
Evidence points to organized crime groups in Mexico and Brazil as key drivers of the surge in crypto adoption. In December 2022, the DEA found that the Jalisco Cartel New Generation (Cartel Jalisco Nueva Generación – CJNG) used Binance, the world’s largest crypto exchange, to funnel as much as $40 million in cocaine and methamphetamine proceeds.
In 2023, the U.S. Treasury sanctioned Mario Jiménez Castro, alias “El Kastor,” for laundering about $870,000 in fentanyl profits for the Chapitos faction of the Sinaloa Cartel via crypto transactions spanning New York, Boston, Denver, Nashville, Omaha, and Salt Lake City. Authorities flagged his crypto wallet and posted a $1 million reward. Just over a year later, he was gunned down in the State of Mexico.
Castro’s case was not an outlier. Though modest in scale, it revealed a rapidly maturing model: crime groups shifting from dabbling in crypto to industrial-scale drug money laundering.
The Allure of Crypto Laundering
As crypto took off in criminal circles, Mexican criminal networks turned to Chinese underground money launderers in the United States, a symbiotic relationship US law enforcement has called “one of the most worrisome threats in transnational organized crime.”
For Chinese brokers, the alliance provided a steady supply of black-market dollars to sell to clients seeking to evade China’s $50,000-per-year foreign-exchange cap.
For drug traffickers, it provided a faster way to turn US dollars into usable funds without moving cash across borders.
It was also cheaper. Chinese brokers could launder money for commissions under 6%, far below the usual 10–15%, because they profited twice on the same dollars: first by cleaning drug cash, then by reselling dollars at a premium to Chinese customers dodging capital controls.
Both sides leaned heavily on crypto methods when COVID-19 border restrictions choked traditional cash-smuggling routes and supply lines in 2020, rapidly scaling a high-volume crypto-laundering pipeline with hubs in various US cities.
SEE ALSO: 5 Years Later, How Has the Pandemic Changed Organized Crime in Latin America and the Caribbean?
The June 2024 “Operation Fortune Runner” in California exposed the scope of a DEA investigation that led to the pending prosecution of dozens of alleged Los Angeles–area Sinaloa Cartel associates laundering drug money with digital currencies.
The laundering scheme was allegedly led by Edgar Joel Martinez-Reyes and Peiji Tong, alias “Dr. P,” a Chinese money broker. He reportedly traveled to Mexico to negotiate fees and secure money-cleaning contracts with the Sinaloa Cartel. From 2019 to 2024, the operation he is accused of running moved more than $50 million in illicit proceeds.
Authorities seized hundreds of kilograms of cocaine and methamphetamine and intercepted approximately $5 million in cash bound to be laundered.
Cartel couriers first collected drug cash and structured bank deposits via ATMs in small increments to evade reporting rules into accounts run by Chinese brokers. Those brokers then aggregated the funds, converted them into digital currencies, then layered transactions on-chain using obfuscation tools such as mixers and “chain-hops,” where funds are moved through multiple intermediate crypto wallets to make them harder to trace. They finally routed the cleaned crypto back to clients so they could cash out overseas or pay suppliers directly.
Crypto-laundering hubs also emerged in other US cities. In 2025, a Mexican broker known as “Meño” was sentenced to eight years in prison for laundering $5.4 million in crypto for the CJNG through networks spanning 13 U.S. cities.
But the hub that developed in Florida rivaled Los Angeles in scale. From 2020 to 2024, a 34-year-old Colombian named Nilson Sneyder Vasquez Duarte, alias “Sobri,” and a dozen associates allegedly laundered tens of millions of dollars in South Florida drug money, routing the crypto to trafficking groups in Mexico and Colombia.
Even after the takedown, the Florida hub continued operating, with agents seizing a record $10 million in Sinaloa Cartel crypto in Miami in July 2025.
The Miami cash bust may represent a pattern: US cash seizures have roughly halved since 2020, while crypto confiscations – $2.5 billion – have outpaced dollars seized, reflecting what the DEA calls crime groups “prioritizing crypto over traditional cash-based laundering.”
Crypto-Chem Connection
Evidence from US court cases shows that the same crypto network that moves dirty cash also finances the upstream production of lethal synthetic opioids.
By 2023, US indictments and sanctions were naming China-based chemical suppliers, along with the crypto wallets tied to them, at the same time that Mexico’s Financial Intelligence Unit (Unidad de Inteligencia Financiera – UIF) reported a sharp rise in virtual-asset alerts.
Yet the crypto flow to chemical providers surged even as sanctions intensified. Blockchain-analytics firms found that these wallets received over $26 million in crypto from Mexican organized crime-linked wallets in 2023 — a 600% increase from 2022 — with on-chain deposits more than doubling again by early 2024. TRM Labs estimated the total flow in 2024 at about $64 million.
Enforcement actions in Florida in 2023 partially interrupted the flow of crypto to chemical suppliers, but even indicted vendors kept receiving payments.
“It’s perverse,” a crypto analyst who requested anonymity due to security reasons, told InSight Crime. “Sanctions made the crypto and the chemicals move faster than ever.”
The downstream impact was evident in the United States: precursor chemical seizures rose sharply in 2023 and surged again in 2025. Experts told InSight Crime that persistence reflected the adaptability of trafficking networks.
SEE ALSO: How Precursor Chemicals Sustain Mexico’s Synthetic Drug Trade
“Once a wallet is flagged, all the assets there are tainted and subject to seizure,” said Helena Margarido, adding that this forces traffickers to constantly rebuild their digital pipelines. “This is something criminals do all the time when a wallet is flagged by authorities. They immediately open a new wallet that nobody knows about and process a transaction.”
Despite these adaptations, US investigations have shown that the crypto-chemical trail is traceable. In February 2025, Wuhan-based Amarvel Biotech and its executives were convicted of “stealth-shipping” precursors to Mexico in exchange for $900,000 in crypto. The link to drug traffickers was inferred, since clandestine drug labs run by Mexican trafficking organizations are the primary buyers of these chemicals.
But the connection soon proved direct. What started as a Wisconsin asset-forfeiture case led investigators to criminal crypto holdings. Chainalysis investigators traced funds step-by-step from cartel wallets through mixers and the intermediate crypto wallets referred to as “hop” addresses to accounts controlled by sanctioned precursor suppliers.
“While feds were chasing down money mules, nerds traced transactions on-chain – and they led straight to Chinese chemical vendors,” said one blockchain analyst who requested anonymity for security reasons.
