US Finally Hits Chinese Labs Over Fentanyl

The DEA pulls off a major undercover sting. Will it impact the flow?

In March, two executives from the Amarvel Biotech company of Wuhan, China flew to Thailand to meet a buyer. The customer promised lucrative business, wanting precursor chemicals to make the perilous drug fentanyl and had sent almost $5,000 in cryptocurrency as a down payment. At the meeting, he said he would ship the precursors to New York to churn out millions of doses of fentanyl. An enthusiastic saleswoman said they could even give advice on the chemical process. “We have a lot of customers in America and Mexico, and they know how to produce,” she said.

In reality, the buyer was a confidential source for the DEA who was taping the deal in an elaborate sting operation spanning five countries. The op was part of a probe by an inter-agency task force to target the Chinese labs that fuel the overdose crisis killing thousands of Americans. It led to indictments that were announced Friday which were “the first prosecutions to charge China-based chemical manufacturing companies and nationals of the People’s Republic of China (PRC) for trafficking fentanyl precursor chemicals,” according to the Justice Department.

Before these charges were unveiled, however, the agents went through with the deal. In April, the buyer wired another $40,000 in crypto and the lab shipped 210 kilos of precursors to near Los Angeles. As the exec explained in an encrypted chat, “New York…has been strict in checking the precursors …so for the sake of safety, this time it is sent to California.”

A confidential source picked up the load, which had an “off white, tan powdery substance,” and the buyer went back for a further order, this time in tons. Another $20,000 deposit was zapped over and a meeting was set up in Fiji for June 8.

In Fiji, the execs were hungry for the deal but said they were worried because of a crackdown on fentanyl cooks in Mexico. “Recently American government…seized some Mexican group and they followed the routes to China,” the saleswoman said.

Her concerns were very real. After the meeting, Fijian police arrested the execs. They were expelled from the country, taken into U.S. custody and flown to Hawaii, where they faced a judge the following day.

The arrests and indictments show how Washington is upping the fight against the source of fentanyl as fatalities continue to break records. Early estimates by the CDC found that almost 110,000 people perished from overdoses in the United States in 2022, with opioids present in about 83,000 cases.

With these numbers, the overdose crisis is not just hype but a genuine catastrophe. Back in 2000, the United States had less than 20,000 fatal overdoses, or a under a fifth as many. The Justice Department claims that, “Fentanyl is now the leading cause of death for Americans ages 18 to 49.” It’s one of the worst overdose crises the world has seen, and the revolution to synthetic drugs is at the heart of the body count.

Above, the “off white, tan powdery substance,” delivered near LA. Below, the invoice from Amarvel Biotech for precursors.

For a century, the U.S. illegal drug market was dominated by substances that hailed from plants: marijuana, cocaine from coca leaves, and opium and heroin from poppies. But the new millennium has seen an explosion in synthetics - drugs like meth and fentanyl that are made through a series of chemical reactions using techniques from the pharmaceutical industry. Traffickers favor synthetics as they eliminate the need for vulnerable crops and are insanely profitable. The precursors worth $45,000 could be turned into fentanyl worth millions on the street.

The scales gradually tilted until 2018, when U.S. agents on the border seized more crystal meth than cocaine (both considered “uppers” and party drugs), and 2021, when they also seized more fentanyl than heroin (both considered “downers”). Fentanyl is especially hazardous, with the prosecutors claiming it is 50 times more potent than heroin, and the “single deadliest drug threat the United States has ever encountered.” The quantities coming in are skyrocketing, with almost 20,000 pounds seized at the border in the last eight months, already beating the entire previous year.

Chinese labs are blamed for selling the precursors to Mexican cartels who churn out the perilous pills and powders and smuggle them north. Yet until now, indictments only targeted the Mexican traffickers, such as the Chapitos, the sons of El Chapo, rather than their suppliers in Asia.

With the cartels, U.S. agents go after gangsters in narco strongholds such as Sinaloa, who live as outlaws with armies of gunmen. But targeting the suppliers, the agents have to contend with registered pharmaceutical companies with global operations. And they confront the Chinese government.

Beijing reacted angrily to the operation, saying the Fiji arrests and expulsion of the execs into U.S. custody were illegal. “China urges the U.S. side to stop dumping blame and to stop smear attacks on China,” the Chinese foreign ministry said on Saturday.

This defensiveness comes amid talk of a new Cold War with China, and there are even accusations that fentanyl is an act of vengeance for the Opium Wars of the nineteenth century. “America's deadly fentanyl invasion could be China's revenge for 'century of humiliation' ,” raged a Fox headline. (It was of course, the Brits who waged the Opium Wars, although it could be seen as the West more generally).

The Justice Department unveiled the new indictments days after Secretary of State Antony Blinken met with Chinese leader Xi Jinping in Beijing to try and warm relations. It’s unclear if they will hamper those efforts; there has long been a tension between U.S. foreign policy objectives and U.S. drug war objectives.

The federal prosecutors are from New York districts, which also convicted the kingpin El Chapo, and Mexico’s former public security secretary Genaro García Luna, who protected him. The indictments target a total of four chemical companies and eight Chinese nationals who work form them.

Chinese labs used to export fentanyl itself to the United States and Mexico but after pressure from President Trump this was banned in 2019. Many of the precursors themselves are not illegal but the prosecutors say the companies conspire to turn them into dope. Biotech, they claim, has advertised how it uses deceptive packaging, passing off precursors as dog food, nuts, or motor oil. Other companies hide the precursors by adding so-called masking molecules that can then be easily removed.

Some companies have warehouses in Mexico where they can stash their chemicals before selling them onto cartels. Sitting on the Pacific, Manzanillo is Mexico’s biggest port with three million containers passing through last year and has long been key for smuggling. But as the chemicals are fairly light weight they can also be shifted by mail services. The companies send precursors “by boat and air, using international mail and express consignment carriers such as United Parcel Service, United States Postal Service, Fedex and DHL,” the indictment says.

This makes the traffic so tough to stop. Speaking in Texas on Monday, presidential hopeful Ron DeSantis promised to use the U.S. Navy to interdict ships carrying precursors into Mexico. However, the U.S. navy could struggle to find the chemicals in a boat with thousands of containers and false labels and he would also need to have them go after U.S. freight companies. Some precursors, an agent told me, can even be shipped into the United States first, taken to Mexico, turned into fentanyl and then smuggled back over the border.

Still, the new indictments could have an impact on the flow of fentanyl, at least in the short term. Chinese executives may be more cautious about selling their wares if they know they could end up in a U.S. jail cell.

The War on Drugs, however, has shown how traffickers can adapt, sometimes with worse consequences. When Florida cracked down on cocaine smuggling in the 1980s, the Colombians turned to Mexico, pumping in billions of dollars that created the cartels here. A danger is that by making it more difficult for those cartels to get precursors, they could simply move up the chemical processing ladder.

“These guys are now recruiting chemistry professors from universities,” former DEA agent Leo Silva told me. “Their goal is to create the precursors in Mexico so they can also stop getting the precursors from China and dealing with them… So they can produce more, and keep more profits.”

On a darker note, this level of overdoses is unprecedented and could affect the trafficking. With more than 100,000 deaths a year, the cartels are killing off their own customer base.

Copyright Ioan Grillo and CrashOut Media 2023