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Bitcoin for Fentanyl: How Drug Dealers Cash in on Cryptocurrency

Bitcoin for Fentanyl: How Drug Dealers Cash in on Cryptocurrency

Connect to the wifi and check your wallet app. Today we are talking about the crooked connections to cryptocurrency.

In a new age of electronic economics, one brand has made a lot of noise- Bitcoin. As early as 2009, when it was created, people began to stockpile the stuff. It was the first decentralized digital currency, and it has inspired thousands to risk this uncharted financial frontier with hopes of discovering a quick way to score some real-world cash from encrypted accounts. Then, just last year the cryptocurrency trend exploded onto Wall Street and ever since people have been trying to take advantage of the hype before the well runs dry. Suddenly anyone with a little extra scratch has become a cyber stockbroker.

While some have tried to cash in just to see if they can hit the crypto-lotto, others have become Bitcoin millionaires. But some of those people were actually gathering those funds through illicit means, like fentanyl trafficking.

Bitcoin for Beginners

For many of us, the whole Bitcoin thing is still a bit confusing. If some of these explanations seem oversimplified for anyone currently obsessed with cryptography, “block time” or whatever a “Merkle tree” is… I’m sorry, I guess.

Bitcoin was originally designed as being a truly free-market currency. This means without any company, country or central bank controlling its value or supply. Bitcoin takes no physical form, but actually only exists as a virtual token. Transactions are recorded in an open public ledger known as a blockchain. This peer-to-peer network avoids many risks of having a central database. But, while the transactions are typically public, the Bitcoin ownership is not.

The digital tokens are stored in a digital wallet that is only identified by a series of numbers and letters. A lot of times people using the digital wallet remain anonymous because they don’t have to provide any personal information to set up their accounts.

Because of all the freedom of Bitcoin, along with its anonymity, it became extremely useful for those involved with the Dark Web. You can read plenty more on that subject, but essentially is it another layer of the internet criminals use for conducting illicit business. One site from the Dark Web would be the infamous Silk Road.

The Future of Fentanyl Financing

Authorities say that bitcoin has helped create a new generation of criminals who buy and sell drugs online. It has become much easier for drug dealers to cover their tracks with cryptocurrencies.

Which of course leads us to fentanyl trafficking. For a long time the majority of drugs sold on the Dark Web were:

However, the sale of fentanyl is rising rapidly. Considering most fentanyl is sold online from dealers overseas, it makes a lot of sense that traffickers would rely heavily on digital money. Greg Nevano, the Deputy Assistant Director of Homeland Security Investigations states,

“You can order illicit opioids right online and have them delivered right to the comfort of your living room.”

According to CDC data, nearly 20,000 people died after overdosing on fentanyl in 2016. This is a huge contributing factor to one of the worst drug epidemics in American history.

For example, undercover investigators working for a Senate committee led by Ohio Republican Rob Portman talk about an e-mail from a fentanyl dealer with an important message for potential buyers. The fentanyl trafficker states:

“We have switched to bitcoin payments only. Now you will enjoy a 10 percent less price tag on all products,”

The email also points out:

“Good part is that paying by bitcoin you can order as much as you like with no limit.”

Ohio is suffering from one of the highest rates of fentanyl overdose deaths in the country. This particular investigation was part of a yearlong inquiry into the international supply chain that funnels fentanyl from China to homes across America. Earlier this year, the committee released a report which tracked activity on six websites offering fentanyl. That report indicated:

In each of these cases, the sites list bitcoin as the preferred method of payment. Portman himself adds,

“Because it’s anonymous, it’s the currency of choice for these drug traffickers,”

Just last fall the Justice Department shut down another illicit online marketplace called AlphaBay. In this case, the Justice Department seized around 144,000 Bitcoins, which comes out to around $48 million.

Cracking Down on Cryptocurrency

Lawmakers in Washington have come to the conclusion that cracking down on cryptocurrency is essential in order to stop the flow of fentanyl coming into the United States. Thankfully, this is one thing that officials from both sides of the aisle agree must be addressed.

Republican Senator Chuck Grassley from Iowa and Democratic Senator Dianne Feinstein from California have presented a bipartisan bill that would create explicit requirements for digital currencies to comply with laws against money laundering. Attorney General Jeff Sessions launched a task force earlier this year to specifically target fentanyl sales online.

Can We Blame the Crypto?

Meanwhile, many advocates for cryptocurrencies are not happy about these new campaigns. Perianne Boring, president of the Chamber of Digital Commerce, is one person who fights on behalf of Bitcoin, stating:

“Blaming bitcoin for this crisis would make as much sense as blaming the internet or cars that drug traffickers have to use.”

Boring’s organization is trying to help. They are part of the Blockchain Alliance, working with more than two dozen companies to help authorities combat crime.

Industry groups also reject the claim that cryptocurrency is anonymous and untraceable. They say Bitcoin users are “pseudononymous” because buying Bitcoin does require real money. Advocates insist that most users convert real cash through exchangers that do actually collect personal information. They also argue that in order to spend that Bitcoin, users will have to convert it back to real money, and that’s where law enforcement can intercept illegal operators.

Crypto-advocates also point out that cryptocurrency exchangers in the United States are also subject to federal reporting requirements and laws against money laundering. Earlier this year an industry analysis by the Foundation for Defense of Democracies found:

  • Less than 1 percent of bitcoin is used for illegal purposes.
  • Almost all of the illicit activity came from transactions on the dark web

However, the report also goes into detail about ways criminals can avoid regulated currency exchangers altogether. This includes using foreign converters or “mixing” sites that allow users to swap Bitcoin.

Meanwhile, new cryptocurrencies that are even harder to trace are gaining in popularity. So it would seem that as soon as the system catches up to a new digital trend, someone creates a copy and the cycle starts all over.

So can Bitcoin and other cryptocurrencies expect to be subject to new attempts at strict regulation? If so, what kind of regulations should be put in place to track digital transactions and prevent further abuse for illicit profits?

The evolution of the internet has changed how illicit drug markets work. The fight against drug trafficking is more complex than ever before, and strategies for facing drug dealing, drug use, and addiction have to evolve, too. This also means providing innovative and cutting-edge treatment options. If you or someone you love is struggling with substance abuse or addiction, please call toll-free 1-800-951-6135. We want to help. You are not alone.   

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Does Instagram need a #Intervention?

Does Instagram need a #Intervention?

Author: Justin Mckibben

It seems in society today cats in costumes and selfies layered in filters and hash-tags are not the only thing getting attention all over Instagram. Apparently thousands of accounts, perhaps even more to date, are currently being used as a powerful platforms for digital drug dealers to sell numerous drugs including marijuana, prescription pills, ecstasy, and other illicit narcotics via the Internet. Apparently pay-pal is acceptable currency now in the drug market. It operates like the notorious Silk Road, which was a marketplace for anonymous, and often illicit, trading that had been under fire for some time. The exception being that it’s a thousand times more user-friendly, and it hasn’t been shut down.

With posts of photos and videos being uploaded at the speed of social media, anyone with a smartphone can easily browse, buy, and sell drugs with almost absolute impunity and security. Instagram posts are not regularly restricted or censored. No accounts postings are ever blurred, age-gated, or otherwise sequestered from Instagram’s growing membership of over 200 million regular users. Despite the fact that this issue is increasingly obvious and only getting worse, the owner of Instagram- Facebook- has also never publicly acknowledged this ongoing criminal activity.

Let’s be practical about this. Social networks such as Instagram or Facebook operate with around 1.2 billion people actively using it at least once a month. With a community this massive there is bound to accumulate a variety of social and networking activity, legal or not, and many major corporations take full advantage of this kind of marketing strategy. Earlier this year, it was discovered that there were widespread gun-sales activity on Facebook, some of it apparently in violation of local and federal laws. Facebook eventually responded by clarifying its policies, and posts were flagged accordingly. Yet so far, Instagram has not faced a similar sanction with its drug dealing population.

#HowItGoesDown

The steep sum of the posts involved indicates a market that’s at least large and organized enough to simulate any other evolving function on the social network and use it to an advantage. Many of the accounts in question are public and easily searchable through Instagram, so followers have no trouble finding the hash-tag (#) they need for whatever drugs they want. Some have hundreds or thousands of ‘likes’ and followers, so their clientele is hard to even begin to estimate.

How would one find a substance on this nation-wide cyber selection? It is so easy it’s scary! All it takes is a hash-tag (#) to narrow down your options. Typing in “#xanax” for example, will teleport a user to a list of hash-tags spanning more than 100,000 images specifically for this one drug, and from there the work is cut out for you. Many of these images are considered “legitimate” as they only portray USING drugs, because that’s  just fine to plaster all over the internet, right? However upon closer inspection you will find posts with drugs for sale hidden in the hash-tags. With a quick untraceable money transfer or Bitcoin transaction buyers can have a shipment delivered to their doorstep in days. The U.S. Post Office or other delivery services are now undercover couriers for this seemingly limitless enterprise.

In Instagram’s defense, the actual transactions don’t actually happen over Instagram. The app is simply being exploited as a billboard for transactions that are completed elsewhere, via Bitcoin in many cases. With this kind of anonymity drug dealers are able to expand their influx of customers through one of the most widely used apps in the world. With minimal investment, cautious dealers can conduct their business in broad daylight, and even broadcast it!

Most dealers typically keep their security as best they can by listing their burner cell phone numbers or burner emails, which basically means that if the heat is put on, they can dump the phone or the email with no strings attached and as little bread-crumbs left behind to trace, if any. Many use the popular messaging app Kik, which offers relatively anonymous messaging without the hassle of phone numbers or any other self-incriminating information.

#ChangingTheGame

Like any clever marketing team, these dealers using Instagram accounts employ hash-tags that typically do not even relate to their specific business just to diversify their audience. Some use seemingly innocent, popular and vague referencing hashtags like #instagood, or #ifollowback. Others cast an even larger net with common pop-culture references like #rihanna to draw as many wondering eyes to their inventory as possible.

The true scale of the epidemic cannot be properly measured without hard numbers from Instagram itself. Even though many images may have multiple hash-tags, it’s apparent that a large number of photos are involved. Brand-name hash-tags, the kind any teenager might know, are particularly active and accessible on Instagram. For example the number of posts tagged with #xanax grows at a rate of over 100 photos per day, and according to further investigation there are more unique groupings like #overnightdelivery and #ohiocartel that can grow by just a few posts a day. Either way they offer easier access to those with a clear intent to sell to or scam Instagram’s millions of users.

There are plenty of scammers out there as well, which also adds an element of danger when dealing with people who intend simply to rob customers. The drugs for sale on Instagram are generally name-brands not hard to recognize:

  • Marijuana
  • Liquid promethazine-codeine cough syrup
  • Xanax
  • Adderall
  • Oxycodone

Even drug-addiction management drugs often used for withdrawal treatments are being taken advantage of like:

MDMA, LSD, and ketamine are also easy to find. However most harder narcotics like PCP, cocaine, methamphetamine, and heroin have so far been very rare on Instagram.

#What’sTheDeal

When inquiries were made to Facebook about the questionable conduct and how they are handling this growing issue, the response wasn’t exactly ideal. The comment sent back to Venturebeat.com authors original investigating was:

“If you are reported for sharing prohibited or illegal content, including photographs or videos of extreme violence or gore, your account may be disabled and we will take appropriate action, which may include reporting you to the authorities. Additionally, it is neither possible nor permitted to complete transactions involving regulated goods on our platform. If your photos or videos are promoting the sale of regulated goods or services, including firearms, alcohol, tobacco, prescription drugs, or adult products, we expect you to make sure you’re following the law and to encourage others to do the same.“

In many opinions this defense is almost a blatant relinquishment of responsibility. There’s little doubt that Instagram has its eye on mobile shopping, so if Instagram eventually intends to legitimize its own marketplace there is a lot more work to be done in developing regulations.

On the other end Instagram has also increasingly appeared in headlines credited to contributions in law enforcement operations to combat illegal activity as well. The Drug Enforcement Administration (DEA) has already used Instagram to bring down international drug cartel members on many occasions, and the NYPD used the platform to conduct the biggest gun bust in their department’s history. Even though it has done some measure of good, the language contained in Instagram’s Community Guidelines doesn’t support the shadowy short-comings in the technology.

Instagram’s only line of defense thus far is simply to be reactive to the problem when it is isolated. Instagram has repeatedly blocked specific hash-tags that cause noticeable problems. Media attention also seems to trigger bans for specific hashtags being exploited. For example, the “#XanaxForSale” hash-tag was blocked with 24 hours of gaining media attention. Hash-tags relating to the sale of prescription cough syrup were similarly blocked after receiving media attention last year.

With all eyes on a thriving social media platform designed to visualize life at its fullest, how is it that this growing drug advertisement on Instagram can be stopped. With #NoFilters in place dependable enough to restrict posts as an effective #ShowStopper, can Instagram turn this around and get some of that #RecoveryLife? Hopefully this is addressed before too much damage is done. Not too many people ‘like’ the #AddictLife. If you or someone you love is struggling with substance abuse or addiction, please call toll-free 1-800-951-6135. We want to help. You are not alone.

 

In the News: Bitcoin CEO Arrested for Silk Road Drug Site

In the News: Bitcoin CEO Arrested for Silk Road Drug Site

image credit: http://bitcoinmagazine.com/

Bitcoin is a peer-to-peer payment system and digital currency introduced back in 2009 as open source software. The system uses cryptography – a way to make the source of money and trade of services clandestine. As you can imagine, this made for some sketchy activities. As a result of its association with illicit activity, the FBI shut down the Silk Road, an online black market and seized 144,000 bitcoins. However, as compared to other governments around the world, the U.S. is considered to be Bitcoin-friendly.

Silk Road is an underground website and a veritable online black market. Online users can browse it anonymously and securely without potential monitoring. It was launched in February 2011 and is referred to as the “Amazon.com of illegal drugs” or the “eBay for drugs.” This week, the CEO of a bitcoin exchange and a bitcoin exchanger were both arrested for their alleged involvement with the Silk Road, according to the Manhattan U.S. Attorney.

Charlie Shrem, 24, was the CEO and vice chairman of the Bitcoin Foundation but, after his arrest, submitted his resignation. The foundation issues a statement saying it was “surprised and saddened to learn of these allegations.” Shrem ran BitInstant from 2011 to 2013. He has been charged with running a scheme that gave out over $1 million in bitcoins to users of Silk Road, which was shut down by the feds back in October.

An underground Bitcoin exchanger, going by “BTCKing,” is actually a Robert M. Faiella, 52, and is accused of running an underground bitcoin exchange on Silk Road from December 2011 to October 2013. He allegedly sold bitcoins to site users looking to buy drugs anonymously. Shrem was arrested at JFK Airport in New York on Sunday. Faiella was arrested at his home in Cape Coral, Florida on Monday.

Shrem was in charge of compliance at BitInstant and, according to the feds, was well aware of illegal activity because he “personally bought drugs on Silk Road.” Shrem and Faiella collaborated and Shrem was giving him discounts on high-volume transactions. Both Shrem and Faiella are charged with one count of conspiracy to commit money laundering – a charge that carries a maximum sentence of 20 years in prison, and one count of running an unlicensed money transmitting business, which would add another five years in prison.

Shrem faces another five years in prison if convicted of the willful failure to file a suspicious activity report.

DEA Acting Special-Agent-in-Charge James J. Hunt said in a statement, “Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way. Drug law enforcement’s job is to investigate and identify those who abet the illicit drug trade at all levels of production and distribution including those lining their own pockets by feigning ignorance of any wrong doing and turning a blind eye.”

Jon Matonis, Executive Director and Board Member of Bitcoin said “it has been mutually decided that Charlie Shrem resign from the Board of Directors, effective immediately. The Board accepted that resignation today.” Matonis made it a point to stress that “the indictment itself is not against Bitcoin or the community at large. Indeed, the complaint acknowledges, ‘Bitcoin are not inherently illegal and have known legitimate uses.’” If you or someone you love is struggling with substance abuse or addiction, please call toll-free 1-800-951-6135.

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