Drug Cartels Use Tether And Bitcoin To Launder Millions, Court Documents Reveal

Unsealed court documents highlight how drug cartels from Mexico and Colombia are leveraging cryptocurrency, particularly Tether (CRYPTO: USDT) and Bitcoin (CRYPTO: BTC), to launder tens of millions of dollars.

What Happened: The documents shed light on how criminal organizations, including the Sinaloa cartel, have turned to stablecoins and blockchain technology to move wealth across borders, according to a report from 404 Media.

Benzinga has reached out to Tether CEO Paolo Ardoino for comments.

One confidential source disclosed to investigators that cartels purchase USDT in Mexico at below-market rates, given its association with drug proceeds.

"The current trend was to purchase USDT from Mexico-based groups at a cheaper rate than the market price and then sell the USDT in Colombia," the source said.

These transactions reportedly take place through currency exchanges, peer-to-peer networks and over-the-counter (OTC) trades.

The court filings revealed substantial cryptocurrency activity linked to these cartels.

A Binance account under investigation processed over $15 million between May 2020 and September 2023, with 452 deposits and 567 withdrawals.

Transactions often involved transferring funds across blockchain networks and converting them into other cryptocurrencies like Ethereum to obfuscate the origin of the funds.

The documents also connect Grupo Gueratti, an investment management firm based in Guadalajara, Mexico, and its alleged associate L.E.O.T., to money laundering activities.

Investigators used undercover operatives to pick up cash in the U.S., convert it into cryptocurrency, and transfer it to wallets linked to L.E.O.T.

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By April 2024, undercover operations had facilitated more than 20 money-laundering transactions involving USDT.

Binance told 404 Media that it works closely with law enforcement to combat criminal activities.

"We work tirelessly alongside law enforcement to help combat crime… When we receive law enforcement requests for information or to freeze funds, we take action quickly," the company said.

Binance also emphasized that blockchain technology provides transparency that aids anti-money laundering efforts.

Tether echoed similar sentiments, highlighting its collaboration with law enforcement to track illicit activity.

"Every transaction is traceable, every asset can be seized, and every criminal can be caught," Tether's spokesperson said.

The company claimed to have blocked over $2 billion in USDT linked to criminal activities and assisted law enforcement in 195 cases across 48 countries.

The documents also reveal that drug cartels have been using Bitcoin alongside Tether to facilitate transactions.

The FBI investigated another money-laundering organization tied to the Sinaloa cartel, which laundered over $52 million in drug proceeds between 2021 and 2023.

Additionally, Chinese manufacturers of synthetic opioids have reportedly used Bitcoin for payments, enabling drug traffickers to transfer large sums instantly across the globe.

Why It Matters: The investigation comes as Tether's connections to Wall Street deepen.

Cantor Fitzgerald, led by Howard Lutnick, has been a key custodian of Tether's reserves.

Lutnick is reportedly planning a multi-billion-dollar program involving Tether, offering dollar loans to clients who pledge Bitcoin as collateral.

While Lutnick has praised Tether's financial transparency, the company has faced allegations of aiding illegal activities, including money laundering—a claim its CEO, Paolo Ardoino, has denied.

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