Bitcoin mining farm discovered in drug raid in Chile

A police raid in Santiago, Chile led to the seizure of several narcotics as well as the discovery of a Bitcoin mining operation. According to local authorities, this was the first time such an obvious connection between organized crime and cryptocurrency was identified in Chile.

According to an article in El Mostrador, a Chilean newspaper, the raid that found the mining computers was the third in a series of police operations against a drug trafficking group led by Kevin Piña Catalán. According to Chilean police, Piña acted as the de facto leader of a group that trafficked in cannabis, which was believed to have been purchased by gangs growing it in the Quilimarí Valley; as well as ketamine, cocaine, ecstasy and other drugs. Police said the group carried out its illegal activities at several different houses in the area, necessitating multiple raids.

The mining equipment was found during a raid on a house in the municipality of La Cisterna in Santiago on September 6, leading to the arrest of seven suspects and the seizure of 43 kilograms of cannabis and 43 grams of ketamine. Ecstasy powder, Ecstasy tablets and a pill press for making additional 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 operational due to local power grid restrictions.

“It is the first time that drug trafficking is so directly linked to virtual data mining of cryptocurrencies,” Subprefect Eduardo Gatica, head of the Southern Anti-Narcotics Brigade, told local media. “This had never happened before in the country.”

Piña was not arrested at the house with the cryptocurrency equipment, but at another location about a week earlier, on August 30th. According to the El Mostrador article, Piña was in possession of 13 kilograms of cannabis, 71 grams of cocaine hydrochloride and two firearms and ammunition at the time of his arrest. An earlier raid on August 5 also resulted in four arrests and the seizure of 1.3 kilograms of cannabis and vehicles. Sub-prefect Gatica said the operation was “divided into three phases to achieve the complete dismantling of this criminal group.”

“Our investigation aimed to uncover a group of violent crimes related to drug trafficking that operated in the southern part of the capital and had links to various communities such as La Cisterna, San Miguel, Buin, Pedro Aguirre Cerda, Cerrillos and Lampa” said Sub-Prefect Gatica.

Police said they had no way of knowing whether the cryptocurrency mining equipment was paid for with legitimate or illegal money, nor did they have any way of knowing whether the group laundered illegal drug money using cryptocurrency in any way both found in the same house could certainly indicate that the two were at least related. Due to the anonymous and multifaceted nature of Bitcoin transactions, it is very difficult, if not impossible, for law enforcement to prove criminal activity or even quantify how much criminal activity is occurring.

“Verifying the criminal origins of assets held in or laundered through cryptocurrencies is a major challenge. Therefore, the extent of the use of cryptocurrencies to launder funds derived from traditional offline criminal activities is difficult to determine,” said a 2023 report on cryptocurrencies by Transparency International. “This is because in such cases, cryptocurrency is not transferred from addresses previously associated with criminal activity.”

To this end, cryptocurrency has been increasingly used in recent years to launder funds obtained through illegal means. According to the report, it is often as easy as exchanging cash for Bitcoin at any Bitcoin ATM.

“…proceeds from crimes in fiat currency are initially transferred to cryptocurrencies without there being any immediate evidence in the blockchain that the criminal origin can be identified,” the report says. “Consequently, the unlawful use of cryptocurrencies is now no longer limited to ‘on-chain’ crimes such as extortion scams or ransomware attacks carried out by cybercriminals demanding payments in cryptocurrencies.” Nor is it limited to use for money laundering . Rather, cryptocurrencies are now being used to commit all types of crimes that involve the exchange of monetary values.”

As for Kevin Piña Catalán and his drug trafficking gang, police told El Mostrador that the entire matter is still being investigated, including the cryptocurrency aspect and how it may or may not be related to the other illegal activities. Authorities said those arrested were accused of a variety of charges, including drug trafficking, money laundering and ammunition trafficking.