Dark web crypto laundering kingpin sentenced to 12.5 years in prison The operator of the longest-running money laundering machine in dark web history, Bitcoin Fog, has been sentenced to 12 years and six months in US prison. Roman Sterlingov, 36, a Russian-Swedish national, was also ordered to repay more than half a billion dollars accrued from the cryptocurrency mixing service that he ran for a …
X -> M -> Y, where X and Y are large sets of wallets, and M is a single "mixer" wallet. The amounts being transferred in and out are different. You may be able to identify the individual wallets in X and Y but you can't identify that funds going into any specific wallet in the set Y come from any specific wallet in the set X. Hence "mixer". All you will be able to see is that various transfers from wallets in X go into M, and that various transfers from M go into wallets in Y. X and Y will probably have a fair overlap as well.
The blockchain will record the transactions, and the identity of the wallets involved, but that's it.
As the article states, this may have legitimate uses, but it is also used (a lot) by criminals for money laundering.
edit - I'll also add, that it is trivially easy to set up a new wallet address, receive funds into that wallet, transfer them somewhere else, and then never use that wallet address ever again. That wallet address will be recorded in the blockchain, sure, but there is zero context associated with it, unless you can otherwise associate it with an individual. Because the blockchain is decentralised, there's nothing to associate that wallet with any physical location, or IP address, unless you happen to sniff where those transactions enter the network from, which requires previous knowledge of who is doing those things in the first place.
Maybe your new wallet will not be linked to the hard earned ransomware money, but will be loaded with money from murder for hire.
It's like thief doing bank transfer to money launderer and then getting bank transfer from money launderer to their other bank account. Except that anyone can read all the accounts.
You can always trace where derivatives of X ended up. So if you are using a mixer, you are putting mark on your back.
You could say the same thing about your paycheck, as a portion of that money may have been used for a murder for hire at some point.
If you have a $20 bill in your pocket, there is a 90% chance that banknote is contaminated with cocaine from the drug trade.
If you have any currency, physical or virtual, then you have a mark on your back.
No it is not the same.
It's like getting paid with banknotes that have serial numbers registered by the police and they are directly linked to a particular crime.
You will have to explain why you have it, if you try to use it on legitimate exchange.
Mixer just makes it more difficult to track it, as thieves and other miscreants get their loots mixed, but not impossible.
"It's like getting paid with banknotes that have serial numbers registered by the police"
No. no, it really isn't. The closest analogy, would be it being like handed banknotes by someone who is being watched by the police.
Bitcoin doesn't have a concept of a "serial number", it has wallets, which have balances, and it has transfers between those wallets. I thought I had adequately explained why a transfer from one wallet to another cannot necessarily be linked to any previous transfers, beyond showing that they came from a wallet that is under suspicion (the mixer wallet) or are going to a wallet known to be associated with some criminal behaviour or another (by linking that wallet address to known criminal activity).
A transfer relates only to available balance (from the sending wallet), and any transferred amount out of a wallet doesn't have to be the same as any previous amount transferred in. Actually, with the concept of transaction fees thrown into the mix, it almost certainly won't.
For example, if the mixer wallet M receives some transfers of 1.04543 BTC, 0.0021345 BTC and 0.02345 BTC from three different wallets, and then transfers 0.0002 BTC to another wallet, show me which originating wallet(s) that came from. Which "serial number" is that, please?
Thieves, miscreants, and EVERYONE ELSE gets their loots mixed -- just like at your local bank.
If I deposit $1000 from selling a bike, and you later withdraw $500 to hit the casino, and some of the bills you withdrew came from my deposit, did the money you withdrew come from the sale of my bike or from the paycheck you deposited last week?
If you have made five $1000 deposits via check over the last month, and then later withdraw $100, which of the five deposits did that $100 come from? None of them? All of them? Since they were check deposits, the serial numbers of the $100 you withdrew would have absolutely no correlation to the source of the funds.
Mixing is a fact of life. Yes, it happens when criminals launder money -- but it also happens in legitimate transactions every day. So yes, it is the same.
"If you have a $20 bill in your pocket,"
The US $100 is the universal currency of bad shit.
For large excursions of bad behavior, the $20 gets too heavy and takes up too much space being 1/5 that of the $100. For really big ventures, commodities and high tech are often the medium of exchange since there can be money to be made on a ship loaded with fertilizer above and beyond just moving the money.
It has been known for years that 90% of all US $20 bank notes were contaminated with measurable cocaine residue. A study published in Forensic Science found that 92% of $1 notes were contaminated. These are the small bills in your pocket, in the tills of every bank and cash register in the nation, not the $100 bills used in bulk to fund the large illegal transactions. We are talking about two completely different things.
Yes, the wallet transferring to the mixer (let's call it A) can be identified as a wallet making a transfer to a mixer, and vice-versa with the wallet receiving a transfer (wallet B). What you can't demonstrate is whether that person owning wallet A bought something legitimately with Bitcoin and was given the mixer wallet address as the wallet to transfer the funds into, or whether the person owning wallet B sold something legitimately to someone else, and received the transfer from the mixer, because here's the thing about bitcoin - without knowing what the people making transfers from one wallet to another are up to, you can't determine whether it is perfectly legitimate activity (for example, I used some of the bitcoins I mined a decade ago to buy some electronics from Pimoroni a few years back, via a direct transfer), and what is not (for example, a dark web transaction for drugs or access to child sexual exploitation material).
Now, there is of course a case to make that anyone using a mixer in this way might be doing something dodgy, but there is also the argument that they may simply be paranoid, and don't want their transactions traced and recorded on a permanent blockchain ledger for all to see forevermore. The problem is in proving it one way or another. I've never used a mixer, but if I was doing something private or personal with Bitcoin, which might put me at risk from the same sort of people who used to go round in the 1930s rounding up people they didn't like the look of, I might consider it.
This is really weak, kind of "dog ate my receipt, officer, I didn't really steal it, honest" excuse.
You can always tell the source of funds in Bitcoin. Whilst the mixer may break the direct link, someone else will end up with the funds directly linked to a crime. If they try to use it on legitimate exchange they may get flagged and probably it is still a crime as they helped with money laundering.
You will only be "safe" if you never use the monies.
This is really weak, kind of "dog ate my receipt, officer, I didn't really steal it, honest" excuse.
You know that, in court, the prosecution is required to prove beyond reasonable doubt not only that there was mes rea and intent to commit a crime, but that what happened was actually a crime, right?
IANAL, but I have sat on a jury, and I'm pretty sure there's need to be some corroborating evidence of criminal activity beyond "it came from / went into this wallet" especially since the article itself mentions legitimate uses for mixers.
Your argument is similar to suggesting that a greengrocer is culpable because they sold some apples to a drug dealer.
While any mildly lucid country would ban mixers which serve no other purpose than money laundering, and any sensible one would ban crime enabling crypto all together, Trump wants America to become the Crypto Crime Capital of the world, so running a mixer wont be in any way illegal.
I heard some people will receive your Bitcoin, say "thank you very much" and then vanish, which is the overwhelmingly more likely outcome in this scenario, which bears mile-high light-up neon letters spelling out "SCAM" which can be read from space.
This, incidentally, is the real reason why Bitcoin is next to useless as an actual means of transferring capital from one person to another. That and the transaction fees which eat up small transactions.
"That and the transaction fees which eat up small transactions."
That's an issue with any sort of transaction, but to have to wait for 20 minutes on top of that is frustrating. It would be pointless to send somebody $50 via overnight envelope as the shipping could be 2/3rds of that or more. Even the usual 3% for a credit card transaction is a tax on not using cash when possible. If you use a card, you pay that fee whether you see it or not. These days it's mostly built into the price of things. I've got to go get some propane in a bit and if I pay cash, I get a discount. This is why I prefer small local traders. They'll wheel and deal, especially for cash.
A good point. The accepted number of confirmations to be sure a transaction has actually gone through is, I believe, six. Since the blockchain is designed so that each block is mined in approximately ten minutes, it's actually an hour, although, in practice, blocks are usually mined a bit faster, because the weighting is based on previous blocks, and the network capacity generally increases.
This, and other reasons, are why actual transactions for "buying" things with Bitcoin are usually done with escrow through a payment processor, or an "exchange". This, of course, has led to some high-profile cases where people running "exchanges" have skimmed off the top, or just straight-up run off with the balances. If you do business in the Wild West, expect cowboys.
...I'll also add, that there is a balancing act between card transaction fees, and the additional costs of handling cash. If you deal exclusively in cash, you'd better have good security, or spend a lot of time banking that cash regularly. That has associated costs, as well as the inconvenience of keeping a cash float for making change, which also can get robbed. Not to mention employees with their hands in the till.
The balance of whether going card only and paying those transaction fees of a few percent, or dealing with cash and taking on the risks and costs of so doing may well work out differently from case to case. I regularly shop at places that prefer cash, and also those which won't accept it at all. YMMV.
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