The 68-year-old drugs trafficker is languishing in jail in Alicante this weekend after Spanish police released dramatic footage of his arrest on Tuesday.
Gilligan was supplying a number of Traveller gangs, including associates of the Finglas-based Monkey Gang, with cannabis herb through the postal system. His son Darren is a suspect in the operation.
"You're talking about quantities of weed not on the biggest scale," a senior source said.
"It's amounts up to 15 kilos or so, but the operation was getting bigger all the time. Pills were being sent in as well.
"Gilligan always had a very close relationship with Traveller gangs - after all, they put him up in the UK back in 2014 when he had to flee the country after he was shot multiple times at his brother's home in Clondalkin.
"The cannabis herb that was being sent to the Traveller crime organisations in Dublin from Spain was then being distributed among other Traveller gangs across the entire country, especially in the midlands.
"The operation was getting bigger and bigger and this led Gilligan's crew to be involved in rows with other crime groupings, particularly a gang based in Clondalkin who have effectively gone to war with his associates.
"Because of this escalating situation, Gilligan has been attempting to use the postal system to get guns into Ireland for his associates, which shows he really believed he was operating in the big league again.
"Some of these weapons have got into Ireland and gardaí have had success in getting them off the street."
The escalating row between Gilligan's associates and an organised gang headed by two dangerous Clondalkin brothers led to his innocent sister's home being shot up last week at Greenfort Crescent, Clondalkin.
A number of shots were fired at Lorraine Dunne's house in the incident last Tuesday week in which a gang of thugs gained access to the property and caused extensive damage.
"Gilligan has had a few lads doing the running for him and they've been getting busier and busier," the source said.
"This has obviously brought him into conflict with other gangs, including the Clondalkin crew.
"That's what was behind the shooting up of that woman's house.
"Gardaí have information that he wanted payback for that and was attempting to get more guns sent into the country, but as usual, he was getting too big for his boots."
Senior gardaí said officers are "extremely sceptical" that a gun recovered this week by Spanish police was the weapon used to murder crime journalist Veronica Guerin in June 1996.
"I guess in this world you can't rule anything out, but I would be absolutely amazed if that gun was the weapon used in that murder 24 years ago," a senior officer said.
"This is the view of pretty much all my colleagues."
Detectives have confirmed that the Colt Python revolver is the same make and model as the weapon used to murder Ms Guerin.
It was found buried in the garden of the Costa Blanca villa where Gilligan was arrested after an international investigation into a drugs smuggling gang he is suspected of leading.
Spanish police released footage yesterday of the moment when Gilligan was ordered to lie face down on his kitchen floor and handcuffed before the gun, wrapped in a plastic bag, was discovered with the help of a metal detector.
Gilligan, was cleared in March 2001 of planning Ms Guerin's murder, but handed a 28-year prison sentence for importing a huge haul of cannabis resin.
Last night, he was languishing in prison near Alicante after being remanded in custody by an investigating judge.
Gilligan, who threatened to kill Guerin and kidnap her five-year-old son in the run-up to her murder after she confronted him over how he made his money, is facing drugs trafficking, weapons and gang membership charges.
Spain's National Police said: "The revolver found is the same make and model as the one used in the assassination of an Irish journalist in Dublin in 1996.
"Spanish officers are working with Irish police to determine if it's the same gun used to end her life."
The weapon was found during raids sparked by an operation launched last year against a suspected drug smuggling gang.
Police believe they had been smuggling marijuana and tranquilliser pills through the post from Spain to the UK and Ireland.
Five other people including a British woman and Darren Gilligan were arrested and released on bail pending an ongoing criminal investigation, but banned from leaving Spain.
A Spanish National Police spokesman did not name Gilligan in their statement, but said: "Investigators managed to intercept four postal deliveries within Spain in which four kilos of marijuana and 15,000 pills had been hidden.
"The well-known Irish criminal who allegedly headed the organisation was sentenced to 28 years in prison in 2001 and served 17 years.
"Irish investigators linked his organisation to the murder of the Irish journalist Veronica Guerin."
A court official confirmed Gilligan was remanded in custody on Thursday after appearing before a judge in Torrevieja.
"All six suspects are being investigated as part of a probe opened for crimes against public health, unlawful possession of firearms and membership of a criminal gang," he said.