The “UK’s El Chapo,” Loses Extradition Appeal and Comes to US to Face Crypto-Related Money Laundering Charges

Last week, the UK’s Matthew Grimm – charged in 2022 in federal court in Florida with narcotics trafficking and money laundering – lost his extradition appeal and will now be sent to the United States to face charges.

Grimm, known as the “UK’s El Chapo,” is charged with conspiring to run the drug marketplace Smokeyschemsite.com, where he accumulated and then laundered bitcoin via a series of “multiple pass-through bitcoin wallets.” Grimm purportedly collected bitcoin and other cryptocurrencies from smokeyschemsite as well as other darknet drug sites, then used mixers and other facilities to obfuscate and launder the proceeds of his drug sales. According to prosecutors, the drugs were ferried from the Netherlands to US-based customers via Smokey's Chem Site, which was allegedly run from as early as 2012, before an undercover operation shut it down.

Grimm, also dubbed the 'El Chapo of the Cotswolds’, because he lives in the picturesque UK countryside, was detained by National Crime Agency (NCA) officers in November 2022 after the US issued a warrant for his arrest. 

In addition to the criminal charges, in November 2022, Grimm was sanctioned by the US Treasury’s Office of Foreign Assets Control, along with other individuals and entities, pursuant to Executive Order (E.O.) 14059 for supplying illicit fentanyl, synthetic stimulants, cannabinoids, and opioids to U.S. markets through internet sales and a host of shell companies. OFAC’s action represented the first use of E.O. 14059 to target those involved in the sale of illicit drugs purchased online and via darknet marketplaces.

“The Treasury Department will continue to deploy its counternarcotics authorities to disrupt those involved in the fentanyl global supply chain,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson at the time of the designation. “Treasury is identifying over 50 virtual wallet addresses associated with this network’s drug trafficking activities as we take further action to counter the abuse of virtual currency. I would like to thank our Dutch and UK partners and U.S. law enforcement counterparts for their partnership and for enabling today’s action.”

In the superseding indictment, the government included a substantial forfeiture allegation related to its seizure of 200+ bitcoin in addition to funds in ETH, ADA, XRP, MATIC, TRX, XTZ, other cryptocurrencies. 

Grimm, who is being prosecuted by the US Attorney's Office for the Northern District of Florida, will be facing myriad criminal charges for narcotics trafficking and money laundering when he arrives in a US Court.

According to TRM's 2023 Illicit Economy Report, the growth rate of sales by online crypto-denominated vendors specializing in fentanyl and its precursor materials dropped by 150% in volume over 2023 from 2022. Despite the slowdown in growth, however, overall vendor sales volumes still increased by over 97% year-on-year, from USD 16 million to USD 33 million. In addition, overall sales of illicit drugs on darknet marketplaces (DNMs) grew to USD 1.6 billion, from USD 1.3 billion recorded in 2022. Individual vendor shops operating outside DNMs rose to USD 310 million from USD 271 million in 2022.

And, it is not just fentanyl. Cryptocurrency use is becoming increasingly prevalent in the international precursor trade. In our latest report, we found that 97% of the over 120 Chinese precursor manufacturers studied offered payment in cryptocurrencies, and received over USD 26 million in cryptocurrency in 2023. Between 2022 and 2023, the amount of cryptocurrency deposited into wallets linked to Chinese precursor manufacturers increased by over 600%—and more than doubled in the first four months of 2024 compared to the same period in 2023.