For ten years, Bitcoin Fog has been insisting on helping customers hide the origin and whereabouts of cryptocurrencies.
Recently, the U.S. Internal Revenue Service stated that the founder behind this long-running anonymous system has been identified as a citizen of Russia and Sweden, and accused him of laundering hundreds of millions of dollars in Bitcoin, most of which originated from Or be sent to the drug market on the dark web.
The most well-known anonymous organization on the dark web
Court records show that the US authorities arrested Roman Sterlingov in Los Angeles on April 27 and accused him of using more than 1.2 million bitcoins to commit money laundering crimes during the 10 years of operating Bitcoin Fog. The total value of these bitcoins at the time of payment For 336 million U.S. dollars.
The Criminal Investigation Department of the US Internal Revenue Service stated that Sterlingov is a citizen of Russia and Sweden. The Bitcoin Fog he runs allows users to mix their transactions with other people’s transactions to prevent anyone from viewing Bitcoin (using a block explorer) The blockchain tracks any individual payment. And he himself will draw a commission of 2% to 2.5% from these transactions.
According to calculations by the US Internal Revenue Service, based on the exchange rate at the time of each transaction, Sterlingov obtained at least approximately $8 million worth of Bitcoin through this service. Moreover, this does not take into account the substantial appreciation of Bitcoin in the past ten years.
According to the content recorded in Sterlingov’s criminal indictment, he created the website at the end of 2011 and promoted it under the Japanese pseudonym Akemashite Omedetou (Happy New Year).
According to the indictment, Omedetou advertised in a post on the Bitcoin forum BitcoinTalk that Bitcoin Fog can “mix your Bitcoin with other users’,” and “using our service can hide your payment information, making it impossible to prove deposit. There is no connection with the withdrawal.”
In the past 10 years of operation, Bitcoin Fog has been accused of laundering $336 million, of which at least $78 million has flowed through the aforementioned services to dark web markets such as Silk Road, Agora, and AlphaBay that sell drugs.
In 2019, the US Internal Revenue Service tried to conduct transactions with Bitcoin Fog through undercover agents. The undercover agent sent a message to the administrator of Bitcoin Fog, clearly expressing the desire to launder the proceeds from the sale of ecstasy. Bitcoin Fog completed the transaction, but did not reply to the undercover news.
Winning or losing does not matter
How did such a cautious Sterlingov fall into the French Open?
This is also thanks to the blockchain technology he used.
The U.S. Internal Revenue Service traced him through the transaction used by Sterlingov to establish Bitcoin Fog server hosting in 2011.
The indictment outlines how Sterlingov used the digital currency Liberty Reserve (now defunct) to pay for Bitcoin Fog’s server hosting fees in 2011, and also presented blockchain evidence that confirmed that Sterlingov used Bitcoin to purchase Liberty Reserve tokens.
Evidence shows that he first exchanged euros for bitcoins at the early cryptocurrency exchange Mt.Gox, then transferred these bitcoins through several addresses, and finally obtained the Liberty Reserve pass that he used to establish the Bitcoin Fog domain name at an exchange. certificate.
The US Internal Revenue Service said that through tracking these transactions, they found a Mt.Gox account using Sterlingov’s home address and phone number; in addition, they found a Google account with a Russian file on the Google drive of which the content was hidden. Description of Bitcoin payment information. This document accurately described Sterlingov’s steps to purchase the Liberty Reserve token he used.
Jonathan Levin, co-founder of blockchain analysis company Chainalysis, said: “This example illustrates that investigators with the right tools can use the transparency of cryptocurrencies to track illegal capital flows.”
This case also shows that Bitcoin, which was once widely regarded as an anonymous, untraceable transaction, is in many cases the opposite. Since the birth of cryptocurrency, the record of all token transactions by the blockchain can often be a means for law enforcement agencies to track transactions many years ago.
Sarah Meiklejohn, a computer scientist at the University of London, pioneered Bitcoin tracking technology in 2013. He believes that the arrest of the founder of Bitcoin Fog based on blockchain analysis shows that investigators can use the “follow the money” technology to trace transactions back a long time ago.
“Through blockchain analysis, all activities are always recorded on this ledger. Even if you did something bad 10 years ago, you can still be caught and arrested now,” Meiklejohn said. “It’s really important that they brought up these transaction information.”
Unsolved mystery
As of the afternoon of Sterlingov’s arrest, Bitcoin Fog was still in operation, but it is not clear who was in operation. In response, neither the Internal Revenue Service nor the Department of Justice has responded.
Meiklejohn wondered why the founder was arrested while Bitcoin Fog was still active. She pointed out that there have been cases where law enforcement agencies secretly took over criminals to launch operations against dark web crimes (Roasted: Fishing? Law Enforcement).
However, if this is also the case with Bitcoin Fog, why would the entire case and Sterlingov’s criminal indictment be made public to the public?
Is there someone else? Or is it a gang committing crimes? The Internal Revenue Service and the Department of Justice still did not respond.
However, this case also has a warning effect for those who want to engage in illegal activities through “mixed currency”.
Money never sleeps, but blockchain and the dark web are not illegal.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.