A Chinese network suspected of exporting fentanyl precursor chemicals has been linked to a cryptocurrency fraud in Japan involving a fake token called “zksync.jp,” with losses reaching several hundred million yen, or more than $1 million, according to a Nikkei investigation.
Authorities and analysts traced the scheme to a cross-border operation that combined illicit chemical trade, financial front companies, and blockchain-based laundering, highlighting growing risks in digital asset markets.
network tied to sanctions and crypto laundering
The investigation found the group used a Japan-based company as a front to move funds through accounts connected to entities under U.S. sanctions. More than 120 cryptocurrency transactions were identified between the network and sanctioned organizations, indicating possible laundering of illicit proceeds.
Blockchain data showed the movement of funds across multiple wallets, complicating attempts to trace the origin and destination of the assets.
key entities and individuals identified
At the center of the case is Hubei Amarvel Biotech, a Wuhan-based manufacturer whose executives were convicted in February 2025 in a U.S. federal court for conspiring to import fentanyl precursors.
Its Japanese affiliate, Firsky, operated out of Nagoya until its liquidation in July 2024. The entity allegedly handled logistics and financial flows for the network under the direction of Chinese national Xia Fengzhi, whose whereabouts remain unknown.
Transactions linked the operation to the Wuhan Yuancheng Group, led by Chuen Fat Yip, who is wanted by U.S. authorities on alleged drug trafficking charges. The U.S. State Department has offered a $5 million reward for information leading to his arrest.
fake zksync.jp token used to deceive
Nikkei traced suspicious wallet activity back to October 2022 using addresses referenced in court filings. The analysis connected the network to multiple fraudulent schemes, including the “zksync.jp” token.
The token, which surfaced in 2023, mimicked a legitimate Ethereum-based project to mislead traders into transferring funds. It used a Japanese domain suffix typically requiring local registration, adding a layer of perceived credibility.
Records indicate the domain was registered by a Hong Kong resident with financial links to Amarvel. Blockchain forensic analysis suggests the use of such domains helped disguise the origin of funds while attracting victims.
broader pattern of crypto use in fentanyl trade
Research from TRM Labs shows that 97% of 120 Chinese chemical firms identified as fentanyl-precursor sellers accept cryptocurrency payments. Earlier this year, a U.S. grand jury indicted two Chinese companies and six individuals tied to similar activities.
Chainalysis data indicates $5.5 million in stablecoins flowed from Latin American cartels to chemical suppliers in China. Wallets associated with these networks have received around $250 million in digital assets since 2015.
growing risks for crypto markets
The case underscores how digital assets are increasingly used to facilitate and obscure proceeds from traditional criminal activities. Impersonation scams, such as fake tokens posing as established projects, have surged sharply, with reported growth of 1,400% in 2025.
Total illicit cryptocurrency volume reached approximately $158 billion in 2025, reflecting rapid expansion in the scale of such operations. The FBI reported that crypto-related fraud accounted for more than $11.3 billion in losses in the U.S. alone.
Underground banking networks, particularly those operating out of China, are estimated to have processed over $100 billion in 2025, relying heavily on digital currencies to move funds across borders.
regulatory response intensifies
The findings come as Japan moves to strengthen oversight of digital assets. The government approved legislation to classify cryptocurrencies as financial products, with implementation expected next year. Regulators are also assessing the potential approval of the country’s first crypto ETFs by 2028.
International cooperation is also increasing. In May, the U.S. Drug Enforcement Administration signed an agreement with the Japan Coast Guard to improve monitoring of fentanyl distribution routes. The United Nations Office on Drugs and Crime has launched parallel efforts to track cross-border financial flows.
Despite these measures, authorities continue to face challenges in tracing illicit funds moving through blockchain networks, as criminal groups adopt increasingly sophisticated methods to obscure transactions.
Worried about fake tokens and fraud? Learn how to spot crypto scams before you invest.
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