A police raid in Santiago, Chile resulted in the seizure of multiple narcotics as well as the discovery of a Bitcoin mining operation, which local authorities said marked the first time such a glaring link between organized crime and cryptocurrency had been found in Chile.
According to an article in El Mostrador, a Chilean newspaper, the raid in which the mining computers were found was the third in a series of police actions against a drug trafficking group headed by Kevin Piña Catalán. Chilean Police say Piña has been operating as the de facto leader of a group that trafficked cannabis suspected to be purchased from gangs growing it in the Quilimarí Valley; as well as ketamine, cocaine, Ecstasy and other drugs. Police said the group conducted their illegal activities using multiple different houses in the area which is why multiple raids were necessary.
The mining equipment was found at a raid conducted at a house in the La Cisterna commune of Santiago on September 6 and resulted in the arrest of seven suspects as well as the seizure of 43 kilograms of cannabis and 43 grams of ketamine. Ecstasy powder, ecstasy tablets and a pill press for making more tablets were also seized. Police said they found the Bitcoin mining operation in one of the bedrooms with 19 computers set up for cryptocurrency mining, only 10 of which were running due to the limitations of the local power grid.
“It is the first time that drug trafficking is so directly linked to the virtual data mining of cryptocurrencies,” said Subprefect Eduardo Gatica, head of the Southern Anti-Narcotics Brigade to local media. “It had not happened before in the country.”
Piña was not arrested at the house with the cryptocurrency equipment, but at a different location about a week prior on August 30. According to the El Mostrador article, Piña was in possession of 13 kilograms of cannabis, 71 grams of cocaine hydrochloride, two firearms and ammunition at the time of his arrest. A previous raid on August 5 also resulted in four arrests and the seizure of 1.3 kilograms of cannabis as well as vehicles. Subprefect Gatica said the operation “was divided into three phases, in order to achieve the total dismantling of this criminal group.”
“Our investigation was aimed at dismantling a group of violent crimes dedicated to drug trafficking that operated in the southern area of the capital, which had links with different communes, such as La Cisterna, San Miguel, Buin, Pedro Aguirre Cerda, Cerrillos and Lampa,” Subprefect Gatica said.
Police said they have no way of knowing whether the cryptocurrency mining equipment was paid for with legitimate or illegal money and they also have no way of knowing whether or not the group was somehow laundering illegal drug money through cryptocurrency, but finding both in the same house certainly may indicate the two were at the very least related. Due to the anonymous and multi-layered nature of Bitcoin transactions, it is very difficult if not impossible for law enforcement agencies to prove criminal activity, or even to quantify how much criminal activity is taking place.
“Verifying the criminal origin of wealth held in or laundered via cryptocurrencies is very challenging. As such, the extent of the use of cryptocurrencies to launder funds obtained from conventional offline criminal activities is hard to determine,” said a 2023 report on cryptocurrency by Transparency International. “This is because in such cases, the cryptocurrency is not transferred from addresses that have previously been linked to criminal activities.”
To that end, cryptocurrency has been used more and more in recent years to launder money obtained through illegal methods. The report said it is often as simple as exchanging cash for Bitcoin at any Bitcoin ATM.
“…proceeds of crime in fiat currency are initially transferred into cryptocurrencies with no immediate indicators pointing to the criminal origin being visible on the blockchain,” the report said. “Consequently, the unlawful use of cryptocurrencies is now no longer restricted to ‘on-chain’ crimes such as blackmail scams or ransomware attacks carried out by cybercriminals who demand payment in cryptocurrencies. Nor is it restricted to use for money laundering. Rather, cryptocurrencies are now used to perpetrate all manner of offenses that entail the exchange of monetary value.”
As for Kevin Piña Catalán and his gang of drug traffickers, police told El Mostrador that the whole matter is still under investigation, including the cryptocurrency aspect and how it may or may not have been related to the other illegal activities. Authorities said those arrested faced a plethora of different charges including drug trafficking, money laundering and ammunition trafficking.