Cocaine Traffickers Allegedly Use USDT for Money Laundering

A recent report alleges that criminal organizations linked to U.S. cocaine imports from Mexico and Colombia are increasingly turning to Tether (USDT) for large-scale money laundering operations. These operations are said to involve major drug cartels, including Mexico’s infamous Sinaloa cartel.

USDT: The New Tool for Drug Cartels

Drug traffickers are reportedly leveraging USDT, a widely-used stablecoin, for its speed and ability to transfer wealth across borders discreetly. A Court Watch report highlights cases where USDT has been central to laundering drug proceeds.

Key Allegations:

• Discounted USDT in Mexico:
  Criminal groups in Mexico allegedly sell USDT at below-market rates because of its association with drug proceeds. The discounted USDT is then resold at higher prices in Colombia through currency exchanges, OTC transactions, and peer-to-peer platforms.
• $5 Million Seized:
  The U.S. government is pursuing over $5 million worth of USDT seized from three Binance accounts tied to cocaine trafficking. One of the accounts reportedly processed over $15 million linked to the illegal trade.
• Connections to Cartels:
  A separate FBI investigation uncovered a $52 million laundering operation tied to major Mexican cartels, including the Sinaloa cartel.

Growing Crypto Involvement

While Bitcoin (BTC) remains a common choice for illicit transactions, USDT’s stability and ease of use have made it increasingly attractive to criminal networks.

A 2020 report first highlighted how drug cartels began adopting USDT. More recent documents detail its continued use alongside BTC by customers of Chinese fentanyl producers supplying Mexico-based groups.

Industry and Law Enforcement Responses

Tether and Binance have addressed their roles in combating illicit use:

• Tether’s Response:
  A spokesperson emphasized that unlike cash, Tether transactions can be tracked and halted when linked to illicit activity. “Tether has the ability to track all transactions and halt USDT whenever it is used in any illicit manner,” the representative said.
• Binance’s Efforts:
  Binance highlighted its anti-money laundering measures, which use advanced tools to detect and prevent illicit activity. “Despite our best efforts, like most companies, we can’t always preemptively stop every bad actor,” a Binance representative said.

Broader Implications

The report raises questions about the unintended consequences of stablecoins’ accessibility and utility. As regulators and law enforcement intensify their scrutiny, industry players may face heightened pressure to implement even stricter compliance measures.

USDT’s use in criminal operations underscores the dual-edged nature of blockchain technology: while it provides transparency and traceability, its accessibility can also be exploited by bad actors.