Chinese fentanyl network used fake ZKsync token and Japanese domain to defraud crypto investors, Nikkei finds

A Chinese network linked to fentanyl precursor exports allegedly created a counterfeit token branded “Zksync.jp” to defraud cryptocurrency investors, exploiting Japan’s regulated digital asset reputation to manufacture legitimacy, according to an investigation by Nikkei.

The findings connect the suspected drug supply chain to a broader pattern of crypto-enabled financial crime that spans multiple jurisdictions.

The report suggests that the suspected Fentanyl-linked crypto fraud generated losses amounting to hundreds of millions of yen, exceeding $1 million at current exchange rates.

The fraudulent token reportedly mimicked ZKsync, the legitimate Ethereum Layer-2 scaling network developed by Matter Labs. Nikkei found no evidence linking either ZKsync or Matter Labs to the alleged scheme.

A fake token with a trusted Japanese identity

Investigators said the operation relied heavily on the “.jp” country-code domain suffix, which is generally associated with businesses or individuals possessing a Japanese address.

By adopting the name “Zksync.jp,” the alleged scammers appeared to capitalize on both the reputation of Japan’s digital asset ecosystem and the growing recognition of ZKsync within the crypto industry.

Nikkei reported that the domain registrant was allegedly a Chinese national based in Hong Kong with financial ties to Hubei Amarvel Biotech, a Wuhan-based chemical company identified as a central player in the wider network.

The alleged Fentanyl-linked crypto fraud highlights how cybercriminals increasingly exploit familiar brand names and trusted jurisdictions to deceive investors worldwide.

“Threat actors routinely leverage trusted domains and recognizable project names to enhance perceived legitimacy,” blockchain intelligence firm Chainalysis told Nikkei, noting that Japanese web addresses often inspire greater confidence among international users.

The investigation also identified Firsky, a company registered in Nagoya, as a potential Japanese front for the network. Nikkei linked the company to logistics operations and fund movements coordinated by Chinese national Xia Fengzhi.

Firsky was liquidated in July 2024, according to corporate records cited by the publication. Xia’s current whereabouts remain unknown.

Blockchain trails reveal links to sanctioned entities

Using wallet addresses disclosed in U.S. court filings, Nikkei traced crypto transactions allegedly connected to Hubei Amarvel Biotech and its Japan-linked operations.

The publication identified more than 120 cryptocurrency transactions involving entities sanctioned by U.S. authorities.

While no court has ruled on the money laundering allegations described in the report, investigators said the on-chain activity showed recurring interactions with wallets associated with networks previously targeted by U.S. enforcement agencies.

Many of the transactions reportedly clustered around parties linked to Wuhan Yuancheng Group, which has been referenced in past U.S. actions involving Chinese national Chuen Fat Yip.

The U.S. State Department has offered a reward of up to $5 million for information leading to Yip’s arrest.

Analysts say the case underscores the unique transparency of blockchain technology, which can simultaneously enable cross-border transactions while leaving behind permanent financial records.

The alleged Fentanyl-linked crypto fraud demonstrates how blockchain analytics tools are becoming central to international investigations involving narcotics trafficking and illicit finance.

Drug supply chains and crypto payments face growing scrutiny

The Nikkei findings arrive as Japan moves to expand its regulated digital asset market.

Lawmakers are considering reforms that would reclassify cryptocurrencies under the Financial Instruments and Exchange Act, while separate proposals aim to reduce crypto-related tax burdens.

Against that backdrop, the latest revelations could complicate efforts to position Japan as a global hub for compliant digital asset innovation.

The alleged Fentanyl-linked crypto fraud also comes amid heightened cooperation between Japanese and U.S. authorities on combating synthetic opioid trafficking.

In May, the U.S. Drug Enforcement Administration and the Japan Coast Guard signed a memorandum of understanding to strengthen coordination against fentanyl smuggling.

Research from blockchain intelligence firm TRM Labs has already illustrated the scale of crypto adoption within precursor chemical networks.

According to the company, 97% of more than 120 Chinese precursor manufacturers it studied accepted cryptocurrency payments, while wallets linked to those businesses received more than $26 million in digital assets during 2023.

“The majority of the factories that manufacture the precursor materials for synthetic opioids are in China,” Kyle Armstrong, a former FBI agent and senior investigator at TRM Labs, said in comments previously cited by multiple media outlets.

A warning sign for the crypto industry

For regulators and blockchain investigators, the case offers a stark reminder that criminals often target the weakest points in the digital asset ecosystem: trust, branding and cross-border complexity.

The alleged Fentanyl-linked crypto fraud illustrates how illicit actors can combine deceptive marketing tactics, shell companies and blockchain-based payments to operate across multiple countries while obscuring traditional financial trails.

Yet the same technology that enables rapid global transfers is also providing investigators with an increasingly powerful forensic tool.

As governments intensify their focus on synthetic drug supply chains, blockchain data is expected to play a growing role in exposing the financial networks that sustain them.