← Menu

Major alleged drug traffickers from the Western Balkans are embracing crypto.

Since the advent of bitcoin 15 years ago, cryptocurrencies have gradually become popular among criminals in the Western Balkans due to improvements in their liquidity, impenetrable digital wallets and the ease of hiding real identities behind pseudonyms. Major alleged criminal organizations in the region therefore rely in part on virtual assets when laundering drug trafficking proceeds. This is creating major challenges for law enforcement, compounded by a lack of expertise in navigating blockchain transactions.

Montenegro’s Kavač clan, reportedly a key actor in the international cocaine trade,1 appears to be a leading regional crypto player. In November 2023, Slovenian prosecutors charged 14 alleged members of the clan’s local branch with laundering drug profits through bitcoin, according to N1 Slovenia and other local news sources.2 This built on an initial May 2021 drug trafficking criminal charge of 48 alleged Kavač clan members.3

In the further investigation, the Slovenian prosecutor increased the number of charges against Blaž Kadivec — brother of the suspected cell leader, Klemen Kadivec — from 48 to 73, and described him as the enterprise’s ‘financial director’, N1 Slovenia reported.4 Messages decrypted by police on the Sky ECC platform reportedly revealed that the group managed its own bitcoin wallet, allegedly overseen by Blaž Kadivec. The prosecution estimates the group earned more than €6 million from drug sales, plus an additional €2.2 million in illegal profits from bitcoin trading, according to N1 Slovenia.5 Both Kadivec brothers have pleaded not guilty to the charges against them, and the trials are ongoing.

In their home country, Montenegro, the Kavač clan is suspected of using cryptocurrencies in connection with cocaine trafficking. In May 2022, Montenegrin media Libertas,6 citing a Europol investigation, reported that Ljubo Milović, a fugitive ex-police officer allegedly involved in the cocaine trade on behalf of the Kavač clan, possessed nearly €50 million in cryptocurrency in his virtual wallet, likely stored on Binance, the largest cryptocurrency exchange.7 Europol believes this money was earned through cocaine smuggling.8 In 2022 and 2023, Milović was charged with cocaine trafficking and cash-based money laundering in Montenegro and Serbia.9 Additionally, Sky ECC messages exchanged by Kavač clan members in November 2020 allegedly mentioned the use of ‘coins’ — a slang term for bitcoin — and referred to a passcode connected to their virtual wallet, known as the ‘treasury’.10

In Serbia, media reports revealed that Veljko Belivuk’s organization, which stands accused of cocaine trafficking11 and working closely with the Kavač clan,12 allegedly converted over €5 million into bitcoin in 2020 and 2021.13 A programmer within the group reportedly facilitated this operation and helped them use encrypted communication apps like Sky ECC for their criminal activities. Additionally, Serbian media portal Nova reported that the Belivuk group used Partizan Belgrade’s football stadium to mine cryptocurrency, after installing machines in one of its restaurants.14

Alleged criminals in Albania also stand accused of using cryptocurrencies to hide the proceeds of crime. In August 2024, Albanian authorities, in collaboration with Europol and Belgian, Dutch and French law enforcement, arrested 15 members of an Albanian group. They are suspected, among other crimes, of large-scale drug trafficking and laundering illicit profits through complex cryptocurrency transactions.15 As far back as 2019, a leading organized crime officer in the UK noted that Albanian drug gangs operating in the UK were laundering profits through cryptocurrency.16

Cocaine traffickers from South America, Asia and Europe — often with ties to criminals from the Western Balkans — are increasingly using cryptocurrency to launder proceeds. According to Chainalysis, a blockchain data and analysis platform, two suspicious clusters of transactions were identified based on travel patterns, locations and connections to Hydra, the largest darknet drug market that was eventually shut down by German authorities in April 2022.17 These clusters drew attention because their perpetrators’ travel movements mirrored a typical cocaine trafficking route — from South America into Western Europe, then through the Western Balkans into Eastern Europe.

The first cluster’s funds travelled from Turkey to Serbia and Bulgaria, while the second moved through Mexico to Spain and Russia. Between 2019 and 2022, these clusters exchanged more than US$13 million in bitcoin and collected US$29 million from Hydra sales, with US$21 million subsequently laundered through two centralized cryptocurrency exchanges.18

Not just money laundering

Cryptocurrencies are used for more than just laundering drug money in the Western Balkans. In February 2023, Eurojust announced that it had — in coordination with Europol — dismantled a cryptocurrency fraud network operating from Bulgaria, Cyprus and Serbia that had defrauded victims in Germany, Switzerland, Austria, Australia and Canada of tens of millions of euros.19

During Operation Start in Bosnia and Herzegovina in May 2023, law enforcement arrested seven individuals suspected of organized crime, corruption and money laundering. Among the seized items were 248 cryptocurrency mining machines valued at US$1.2 million.20 In Kosovo, police conducted several raids in 2023 and seized around 200 illegal cryptocurrency mining machines.21

Another significant event was the arrest in Montenegro in March 2023 of crypto entrepreneur Do Kwon, a South Korean national who the US and South Korea wanted for alleged fraud.22 The collapse of his stablecoin23 terra and its sister coin luna in 2022 triggered an industry rout that wiped an approximate US$2 trillion in crypto market value.24 In the run up to Montenegro’s June 2023 elections, Do Kwon sent a letter to Montenegrin authorities claiming that he had a ‘very successful investment relationship’ with Milojko Spajić,25 the Europe Now leader who became prime minister and formed a new government in October 2023. US court filings subsequently reportedly showed that Spajić personally invested in Do Kwon’s company, Terraform Labs, in 2018.26 Spajić revealed that, as a citizen, he had given a statement to the prosecution, adding that he would assist the relevant institutions in clarifying all aspects of the ongoing case.27 On 20 September, Montenegro’s Supreme Court ruled that the conditions for Do Kwon’s extradition to South Korea and the US were met, but the justice minister has yet to decide which country to extradite him to.28

Law enforcement challenges

Asset seizure, confiscation and recovery are crucial tools in combating organized crime. However, seizing crypto assets is even more complex than traditional assets such as cash or physical property.

Cryptocurrencies differ from traditional assets due to their decentralized nature and storage in encrypted wallets, which allows cross-border transactions with minimal oversight. This complicates international cooperation and poses a significant challenge for law enforcement authorities, which often lack the necessary legal and practical tools and expertise to address digital crimes.

A major obstacle is accessing and seizing digital wallets. Criminals frequently use multi-signature wallets, which require multiple private keys to authorize transactions, adding another layer of difficulty. Without the cooperation of multiple suspects and access to keys, entering these digital wallets is nearly impossible. Additionally, the pseudonymity of cryptocurrencies complicates traditional investigative methods, requiring specialized forensic tools and expertise.

Tools for hiding proceeds include mixers, also known as tumblers, whereby an initial crypto holding derived from criminal activity is converted into multiple other crypto­currencies in a chain of transactions through multiple wallets (accounts).29 This is often done on an exchange that is regulated by a jurisdiction with a weak record of enforcing know your customer (KYC) and wider anti-money laundering (AML) standards, or even on an exchange that has no declared domicile. Some crypto­currency projects, notably Monero, are actively promoted as ‘privacy’ coins,30 attracting criminals who seek to avoid the digital footprint left by bitcoin transactions.31

Upskilling for the digital age

To address the challenges generated by criminals’ resort to crypto, law enforcement must invest in advanced blockchain analysis tools and forensic software capable of tracing transactions across multiple blockchains. Cooperation with international partners, including Europol and Interpol, is essential for sharing intelligence and developing joint strategies to combat transnational crypto-enabled crime networks. Furthermore, training programmes focused on digital assets should be prioritized to equip officers with the skills necessary to investigate and prosecute these cases.

Law enforcement should also advocate for stronger regulatory frameworks that require exchanges and other crypto service providers to implement strict KYC and AML procedures. Currently, Serbia is the only country in the region that has regulations for virtual currencies. Strengthening the regulatory framework will make it more difficult for criminals to convert illicit funds into legitimate assets without leaving a trace. Effective regulation, combined with enhanced law enforcement capabilities, can significantly disrupt organized criminal groups’ ability to exploit cryptocurrencies’ vulnerability to money laundering.

Notes

  1. Aleksander Klapp, Rip their skin off, London Review of Books, 46, 8, 25 April 2024; see also Observatory of Illicit Economies in South Eastern Europe, Bloody clashes among Montenegrin clans have not undermined their role in the international cocaine trade, Risk Bulletin 16, GI-TOC, February 2023. ↩

  2. Razširili obtožnico: obtoženi upravljal z bitcoin denarnico Kavaškega klana, N1 Slovenia, 17 November 2023. ↩

  3. Criminal Police Directorate of Slovenia, Criminal charge against Klemen Kadivec and others, filed under number KT/8788/2021, 14 May 2021. ↩

  4. Razširili obtožnico: obtoženi upravljal z bitcoin denarnico Kavaškega klana, N1 Slovenia, 17 November 2023. ↩

  5. Ibid. ↩

  6. Olivera Lakić, Polakote, što bi rekao jedan čovjek, Libertas, 16 May 2022. ↩

  7. Ibid. ↩

  8. Policajac Ljubo Milović drži 50 miliona na svom računu za kriptovalute?, Press, 17 May 2022. ↩

  9. Special State Prosecutor’s Office of Montenegro, Indictment against Ljubo Milović and others, filed under number Kt-S 93/23, 15 September 2023; Prosecutor’s Office for Organized Crime (Serbia), Indictment against Ljubo Milović and others, filed under number КТО 10/23, 9 February 2023. ↩

  10. Information obtained from a journalist in Montenegro, November 2020. ↩

  11. Andrew Higgins, Arrests shake up a soccer scene in Serbia ruled by gangsters and ‘gravediggers’, The New York Times, 20 March 2021; Robert F Worth, The president, the soccer hooligans and underworld house of horrors, The New York Times, 1 June 2023. ↩

  12. In August 2024, Serbian prosecutors charged 19 people, including Belivuk, in connection with a string of murders in Greece in 2020 amid a gang war between the Kavač clan and the Škaljari, a rival Montenegrin clan. Milica Stojanovic, High profile defendants charged over gangland-style murders in Greece, Balkan Investigative Reporting Network, 22 August 2024. ↩

  13. Kripto Velja: Krvavi keš Belivuk pretvarao u bitkoine, sada je nemoguće ući u trag tom novcu i zapleniti ga, Kurir, 10 March 2021. ↩

  14. Dušan Marković, Otkrivamo Ekipa Velje Nevolje rudarila bitkoine na stadionu i zadužila Partizan milion evra, Nova, 20 October 2022. ↩

  15. Europol, 15 arrested in crackdown on high-profile Albanian criminal network, 1 August 2024. ↩

  16. John Simpson, Albanian gangs using bitcoin to flood streets with cocaine, Sunday Times, 3 August 2019. ↩

  17. Gurvais Grigg, Combatting trafficking with blockchain analysis, Chainalysis, 12 April 2022. ↩

  18. Ibid. ↩

  19. Eurojust, Takedown of fraudulent cryptocurrency network in Bulgaria, Cyprus and Serbia, 12 January 2023. ↩

  20. U Vogošći zaplijenjeno 248 mašina za rudarenje kriptovaluta: Vrijede 1,2 miliona dolara, Dnevni avaz, 12 May 2023. ↩

  21. Xhorxhina Bami, Seizing crypto-mining equipment has saved Kosovo ‘millions’, govt claims, Balkan Insight, 17 April 2023. ↩

  22. Observatory of Illicit Economies in South Eastern Europe, Montenegro’s bid for crypto kudos heralds risks, Risk Bulletin, Issue 17, GI-TOC, December 2023; Annabelle Liang, Guy Delauney and Nadeem Shad, Do Kwon: Fugitive ‘cryptocrash’ boss arrested in Montenegro, BBC, 24 March 2023. ↩

  23. A stablecoin is a cryptocurrency tied to the value of a national currency or a basket of currencies, often the US dollar or the euro and at 1:1; hence the moniker ‘stable’. ↩

  24. Andrew Higgins, How a crypto fugitive upended the politics of a troubled Balkan nation, The New York Times, 24 June 2023. ↩

  25. Ibid. ↩

  26. Jasmina Kuzmanovic and Ava Benny-Morrison, Montenegro premier personally invested in Kwon’s crypto holdings, Bloomberg, 20 June 2024. ↩

  27. Premijer Crne Gore: Afera Do Kvon lažna, Danas, 5 April 2024. ↩

  28. Supreme Court of Montenegro, Vrhovni sud predmet Do Kvon dostavio ministru radi odlučivanja o dozvoli izručenja, 20 September 2024. ↩

  29. Bitcoin money laundering: how criminals use crypto, Elliptic, 18 September 2019. ↩

  30. In a promotional video on its homepage, Monero unabashedly promotes itself as a ‘secure, private and untraceable currency’. ↩

  31. Hannah Murphy, Monero emerges as crypto of choice for cybercriminals, Financial Times, 22 June 2021. ↩