Crypto Becomes $100B Conduit for Drug Cartel Funds

Encrypted apps and Chinese money laundering networks outpace law enforcement's ability to track illicit crypto flows

Published on Feb. 11, 2026

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Drug cartels are increasingly shifting an estimated $100 billion in annual U.S. drug proceeds to cryptocurrency, using freelance brokers, encrypted messaging apps, and Chinese money laundering networks that charge just 1-2% fees - far below the 8-15% rates of traditional cash laundering methods. Law enforcement admits they are underprepared to keep up with the cartels' technological sophistication, as encrypted communications and blockchain's borderless nature consistently outpace analog investigative techniques.

Why it matters

The rise of crypto-based money laundering by drug cartels threatens to undermine public trust and legitimacy in the cryptocurrency ecosystem, as every transaction on the blockchain's permanent ledger exists in tension between enabling criminal investigations and facilitating illicit activity that outpaces law enforcement's ability to respond.

The details

Freelance brokers like David Scotese, operating under the handle 'LetterGuy21969' on LocalMonero.co, have processed over 4,000 transactions for cartels between 2021 and 2023, using cash handoffs, mail drops, and converting dirty dollars into Bitcoin, Monero, or Tether. Chinese money laundering networks dominate by undercutting traditional brokers' fees, charging just 1-2% versus the previous 8-15% rates, and treating drug cash like any other commodity to supply U.S. dollars to Chinese clients evading their country's currency limits. Stablecoins like Tether now represent 84% of illicit crypto volume, largely due to Tron blockchain's sub-$1 transaction costs.

  • Between 2021 and 2023, broker David Scotese processed over 4,000 transactions for cartels.
  • The Trump administration's shift of resources from crypto units to immigration enforcement widened the gap between law enforcement and cartel crypto expertise.

The players

David Scotese

A freelance broker who processed over 4,000 transactions for cartels between 2021 and 2023 under the handle 'LetterGuy21969' on LocalMonero.co.

Derek Maltz

A former DEA administrator who admits law enforcement is underprepared to match cartels' technological sophistication.

Julie Shemitz

A former AUSA who says federal prosecutors are brutally honest that they "absolutely cannot keep up" with cartel crypto operations.

Nick Carlsen

An analyst at TRM Labs who warns that crypto-native laundering, eliminating fiat on-ramps entirely, could be a game-changer for law enforcement.

Peiji Tong

One of the individuals recently indicted for laundering $2.8 million in Sinaloa cartel proceeds.

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What they’re saying

“We must not let individuals continue to damage private property in San Francisco.”

— Robert Jenkins, San Francisco resident (San Francisco Chronicle)

“Fifty years is such an accomplishment in San Francisco, especially with the way the city has changed over the years.”

— Gordon Edgar, grocery employee (Instagram)

What’s next

Authorities will continue to investigate and prosecute individuals and networks involved in using cryptocurrency to launder drug cartel funds, though the scale of the problem poses an ongoing challenge.

The takeaway

The rise of crypto-based money laundering by drug cartels highlights the tension between blockchain technology's transparency and its borderless nature, which consistently outpaces law enforcement's ability to keep up. This threatens to undermine public trust in the cryptocurrency ecosystem unless significant strides are made to enhance law enforcement's crypto expertise and tracing capabilities.