Tether Is So Closely Linked to Cartels It Trades at a Discount in Mexico: Report

A money laundering organization involved in importing cocaine into the United States from Mexico and Colombia is using Tether (USDT), a new report claims.

Drug traffickers have turned to crypto, and USDT in particular, in recent years “as a way to quickly move wealth across borders,” according to a recent Court Watch report. Court records from several cases show that criminal organizations – including the Mexican drug cartel Sinaloa – use such substances for large-scale drug trafficking.

The news follows a recent report that a Canadian Olympic snowboarder and his gang allegedly used USDT as part of a cocaine trafficking ring, with the group also believed to be responsible for several murders. Law enforcement officials say cocaine was transported from Colombia through Mexico and then to the United States and Canada.

According to reports, the situation is so dire that USDT is being sold at a discount in Mexico because the knowledge that it comes from drug proceeds is so widespread. The report quotes a source saying that “the current trend has been to buy USDT from Mexico-based groups at a cheaper rate than the market price, and then sell the USDT in Colombia at Casa de Cambios. [currency exchanges]virtual currency exchanges, over-the-counter (OTC) transactions or peer-to-peer (P2P) transactions.”

“The USDT was sold cheaper in Mexico because it was known to be drug proceeds,” the anonymous source points out. Decrypt could not independently verify that USDT is sold at a discount in Mexico.

In a recent document – ​​a civil forfeiture complaint – the US government sought access to more than 5 million seized USDT spread across three separate Binance accounts. These funds are also said to be linked to the cocaine trade, and one of the Binance exchange accounts involved handled more than $15 million worth of funds.

Tether emphasized that these transactions took place on the secondary market, without any intervention from the stablecoin issuer. “Unlike fiat money, which remains the dominant form of financing for criminal and terrorist efforts worldwide, Tether has the ability to track all transactions and stop USDT when used in any illegal way,” said a representative from Tether.

“Despite our best efforts, like most companies, we cannot always preemptively stop every bad actor,” a Binance spokesperson said Declutter. The spokesperson also highlighted the exchange’s strict anti-money laundering measures, with “sophisticated internal and external tools to detect potential illegal activities.”

Another document sheds light on a Federal Bureau of Investigations (FBI) investigation into a separate money laundering operation involving cryptocurrency brokers. The operation was linked to major Mexican cartels – including the Sinaloa Cartel – and laundered more than $52 million in drug proceeds between 2021 and 2023.

This case also involved USDT, with a source telling investigators that a Costa Rican lawyer wanted to “purchase large amounts of USDT.” This does not appear to be a new trend, as a 2020 report shows that drug cartels were already known to be using USDT as part of their cash smuggling operations at the time.

USDT is not the only crypto asset used by cocaine smugglers. Previous reports also indicate that millions of dollars worth of USDT were used alongside Bitcoin (BTC) by Mexico-based customers of Chinese fentanyl producers.

Binance and Tether have not yet responded to Decrypt’s request at the time of writing.

Edited by Stacy Elliott.