US Treasury Blacklists Bitcoin, Litecoin Addresses of Chinese 'Drug Kingpins'

The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) has sanctioned three Chinese nationals and their cryptocurrency addresses, alleging they violated money laundering and drug smuggling laws.

OFAC named Xiaobing Yan, Fujing Zheng and Guanghua Zheng as narcotics traffickers under the Foreign Narcotics Kingpin Designation Act, freezing any property they own within the U.S. and listing a number of email aliases, citizen numbers and passport information for the three.

The agency also listed

a number of bitcoin addresses, as well as one litecoin address, that the agency claims belong to the Chinese citizens.

According to a press release, Fujing Zheng is a "significant foreign narcotics trafficker," who received support from Guanghua Zheng. Yan has separately been designated "as a significant narcotics trafficker."

In addition to naming the three individuals, OFAC listed Qinsheng Pharmaceutical Technology Co. Ltd. and the Zheng Drug Trafficking Organization in Wednesday's update.

OFAC coordinated with the Financial Crimes Enforcement Network (FinCEN) and local law enforcement agencies, said Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelkar in a statement.

The group specifically coordinated Wednesday's designations with the U.S. Attorney’s Office for the Northern District of Ohio, the U.S. Attorney’s Office for the Southern District of Mississippi, the Department of Justice’s Criminal Division, the Drug Enforcement Administration’s (DEA) Cleveland and Gulfport offices and DEA’s Special Operations Division, the release stated.

"The Chinese kingpins that OFAC designated today run an international drug trafficking operation that manufactures and sells lethal narcotics, directly contributing to the crisis of opioid addiction, overdoses, and death in the United States," Mandelkar said, adding:

"[Fujing] Zheng and Yan have shipped hundreds of packages of synthetic opioids to the U.S., targeting customers through online advertising and sales, and using commercial mail carriers to smuggle their drugs into the United States."

Second action

Wednesday's action marks the second time OFAC has sanctioned digital currency addresses specifically, having last done so in November 2018 when a pair of Iranian nationals were added to the Specially Designated Nationals list.

At the time, Mandelker said the agency was "publishing digital currency addresses to identify illicit actors operating in the digital currency space."

Individuals who violate the Kingpin Act might face civil penalties of a $1.1 million fine per violation, in addition to possible criminal penalties of a $5 million fine and up to 30 years in prison.

Drew Hinkes, general counsel at Athena Blockchain and an attorney with Carlton Fields, told CoinDesk that any property or interests in property that the three have in the U.S. must now be blocked and reported to OFAC.

"U.S. entities need to comply with OFAC requirements and need to shut down any accounts that are listed," he said.

According to the SDN list, the following addresses have been affiliated with the individuals.

Xiaobing Yan:

• 12QtD5BFwRsdNsAZY76UVE1xyCGNTojH9h
• 1Kuf2Rd8mDyAViwBozGTNYnvWL8uYFrkVo
• 13f59kUM5FU8MfTG7DCEugYarDhSD7XCoC
• 1P3ZfGFLezzYGg9k5SVzQmnjyh7nrUmF2y
• 1EpMiZkQVekM5ij12nMiEwttFPcDK9XhX6
• 1JREJdZupiFhE7ZzQPtASuMCvvpXC7wRsC

Fujing Zheng:

• 17ezuJoT3XBbdcwFZbkTnrXbup11F4uhiy
• 1DH2xDH7TngrDU6LXciprKCBKNcPA1xX8A

Guanghua Zheng:

• 33Kja69SQVc8kozpoP7Qw6HFtGxHkiWzTz
• 3MkUNScqf21EcfWq6T4x2MFgBeSTqhB5t6
• 18uKfaUjgG52rVeXEi3wxnveww7zZuECtE
• LaizKtS5DUhPuP1nTQcc83MS7HwK6vk85z

Sigal Mandelkar image via CoinDesk archives