During an operation against a Chilean trafficking organization in Santiago, the Investigations Police of Chile (PDI) discovered not only illegal substances but that the suspects were operating a whole cryptocurrency mining operation.
In early September, the Anti-Narcotics Brigade for the Southern Area of Santiago’s Metropolitan Region conducted a raid in La Cisterna neighborhood. The police raided a room containing 36 kilograms of cannabis, a pill press used for ecstasy production, 43 grams of ketamine and what the on-site Cyberscrime Brigade confirmed as a Bitcoin mining operation.
“This is an unprecedented event. This is the first time drug trafficking has been linked so directly to cryptocurrency mining,” said Eduardo Gatica, head of the Anti-Narcotics Brigade.
The police confiscated a total of 19 mining machines, but only 10 of them were operational due to limitations in the regional electrical grid.
Officials in the Metropolitan Region suspect that the advanced mining infrastructure served as a means to launder money, even though cryptocurrency mining itself is not unlawful. According to law enforcement, the individuals who have since been apprehended purportedly used proceeds from their drug trafficking operations to acquire mining equipment, funnel funds into their computing endeavours and subsequently convert Chilean pesos into Bitcoin.
Prosecutor Carlos Yáez Dáz, representing the High Complexity and Organized Crime Office in the Metropolitan Region, characterized the connection between illicit activities and Bitcoin mining as “an innovative” strategy.
Read more: British Columbia’s top court gives the nod to Hut 8 and US Bitcoin merger
Read more: Hut 8 Mining’s second annual ESG report shows dedication to carbon neutrality
Mining infrastructure used as means to launder money
The network was part of a pool, which is a collection of nodes akin to the one uncovered, with each member taking away a percentage of the block reward as it invested in energy. There is a suspicion that the individual or group managing this network, which remains somewhat unclear at this point, intended to expand its data processing capabilities to increase the amount of yield his network would receive from the pool.
In this particular instance, it could have been a completely legitimate operation, separate from the drug trafficking activities occurring just a few rooms away. However, law enforcement agencies suspect that the primary objective of this sophisticated system was to facilitate money laundering.
This could involve the acquisition of additional equipment, funded with the proceeds from drug trafficking, to engage in large-scale cryptocurrency mining. The idea might have been to integrate the resulting profits into the formal economy or to somehow legitimize ill-gotten gains through cryptocurrency mining or investments in cryptocurrencies.
These are financial instruments not subject to any state control and offer complete anonymity, according to Prefect Luis Orellana, head of the Metropolitan Cybercrime Brigade. In various other countries, it’s not uncommon for drug cartels to employ this methodology. In fact, during one of the investigations into the Tren de Aragua (in Iquique), it was discovered that a minimum of four billion pesos had been invested in cryptocurrencies.