Drug cartels in the United States are increasingly using cryptocurrencies to clean their money. Authorities say the scale and complexity of these operations are making it nearly impossible for police to keep up. From cash handoffs in parking lots to global networks, criminals are moving illicit money faster and harder to trace than ever.
Cash, Crypto, and Freelance Brokers
Across the U.S., ordinary-looking people are trading cash for cryptocurrency. These exchanges happen in parks, behind buildings, or even by mail. One well-known example is David Scotese, also known online as LetterGuy21969. From 2021 to 2023, he ran a small brokerage in Murrieta, California, exchanging cash for crypto and completing thousands of transactions for clients he knew little about. Scotese eventually pleaded guilty to operating an unregistered money-transmitting business and was sentenced to probation after time served.
Bitcoin is popular because it is liquid and widely accepted. Monero is almost untraceable, offering privacy for criminals. Tether, a stablecoin pegged to the dollar, allows cheap, fast transfers in tiny fragments. Authorities describe this as a freelance-style laundering system. Individual brokers, couriers, and small operators move millions of dollars, connecting local brokers like Scotese to larger international networks, including Chinese operators who provide U.S. dollars to clients abroad.
Encrypted messaging apps such as Signal, Telegram, WhatsApp, and WeChat make monitoring these networks extremely difficult. Criminals use these apps to verify payments, arrange trades, and build networks. Wiretaps and traditional surveillance, once key tools for law enforcement, now capture very little.
Cartels, Chinese Brokers, and Global Networks
Investigations show Mexican cartels supply the cash, while Chinese brokers, including Peiji Tong, act as intermediaries. Cartels mainly want to move value; the brokers sell U.S. dollars to clients abroad, profiting from currency restrictions in China. This allows them to undercut traditional money launderers, who used to charge 8–15% fees, with brokers now charging 1–2% or even less.
Law enforcement has uncovered operations ranging from parking-lot cash trades to billions in Tether wallets. Some use “flying-money” schemes: cash moves from the U.S. to China or Mexico, while crypto or drug chemicals move in the opposite direction. Edgar Joel Martinez-Reyes, a Mexican suspected narco trafficker, was involved in monitored operations with Tong. Undercover agents tracked over $15 million in cash pickups in Kentucky alone. In other cases, hundreds of thousands of dollars were exchanged behind apartment buildings or in quiet parking lots, illustrating the massive scale of this underground system.
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Law Enforcement Struggles to Keep Up
Federal agencies report they are overwhelmed. Tracking crypto requires wallet addresses, private keys, or transaction hashes, often stored on encrypted devices. Many local departments lack the expertise or staff to investigate digital money flows.
Former officials, including Derek Maltz, former DEA acting administrator, Lili Infante, and Christopher Urben, warn that the scale of these operations exceeds current capabilities. Government changes have reduced crypto-focused units and deprioritized 1960 offenses against unlicensed money-transmitting businesses, removing a key legal tool for enforcement.
Even when small brokers like Scotese are arrested, large Chinese networks and multi-city freelance operations continue moving billions. Authorities often target smaller operators while the real flows remain largely untouched. The use of encrypted apps and global networks allows these systems to expand faster than law enforcement can respond.
Drug cartels are no longer relying solely on cash. Cryptocurrencies, encrypted messaging, and global freelance networks have created a financial web that is increasingly invisible to authorities. Agents continue to investigate and prosecute individuals, but the sheer scale and sophistication of these operations are proving a major challenge to policing illicit money in the digital age.