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Alleged $366M Bitcoin mixer busted after analysis of 10 years of blockchain data

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U.S. authorities have arrested the alleged mastermind behind a multi-million darknet-based BTC mixing service, Bitcoin Fog, after analyzing 10 years of blockchain data.

Authorities have issued a chilling warning to different customers of unlawful blockchain providers: Something you do as we speak might come again to hang-out you as “this activity is on this ledger forever” and ever-more refined analytics know-how can observe down crimes dedicated years earlier.

For roughly a decade, Bitcoin Fog has enabled customers to hide the origin and vacation spot of its customers’ crypto property. Nonetheless, the Inside Income Service is charging Russian-Swedish citizen, Roman Sterlingov, with laundering greater than 1.2 million Bitcoin value $336 million whereas serving as the web site’s administrator.

Sterlingov was arrested on April 27 in Los Angeles, with the IRS estimating he obtained commissions of between 2% and a pair of.5% for mixing providers on the time of every transaction — value roughly $8 million then however exponentially extra as we speak.

Authorities estimate at the very least 23% of the Bitcoin that flowed via the blending service was transferred to darknet-based narcotics marketplaces corresponding to Silk Highway.

Sterlingov’s arrest was the product of authorities fastidiously unpicking the net of BTC transactions related to the mixer service relationship again to 2011, utilizing the Bitcoin blockchain to establish the location’s operator.

Sterlingov based the web site in late 2011 below a Japanese pseudonym that means “Happy New Year, ” spruiking Bitcoin Fog as eliminating any chance of authorities “finding your payments and making it impossible to prove any connection between a deposit and a withdraw inside our service.”

In 2019, undercover IRS agents engaged Sterlingov through the platform, claiming they wished to launder the profits from ecstasy sales. The transactions were processed without a reply.

Law enforcement was able to identify that Sterlingov had paid for Bitcoin Fog’s server hosting expenses using the now-defunct digital currency Liberty Reserve, allowing them to trace when he bought the Liberty Reserve using Bitcoin transferred from the collapsed pioneer crypto exchange, Mt Gox.

From there, the IRS was able to identify the home address and phone number that Sterlingov had registered to his account, and eventually a Google Drive account containing instructions outlining the steps he took to purchase his Liberty Reserve coins.

“This is yet another example of how investigators with the right tools can leverage the transparency of cryptocurrency to follow the flow of illicit funds,” mentioned Jonathan Levin, co-founder of blockchain forensics agency, Chainalysis.

Laptop scientist, Sarah Meiklejohn, said:

“With blockchain analytics, the thing we say over and over is that all this activity is on this ledger forever, and if you did something bad 10 years ago you can be caught and arrested for it today.”

Regardless of Sterlingov’s detention Bitcoin Fog stays on-line, though it’s unclear who is working the location.

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