The US authorities have arrested the alleged mastermind behind Bitcoin Fog, a Darknet-based mixed BTC service with billionsafter analyzing 10 years of blockchain data.
Authorities have warned other users of illegal blockchain services of a chilling warning: Anything you do today can haunt you because “this activity is forever in this ledger” and increasingly sophisticated analytical technology can track crimes committed years ago.
Bitcoin Fog has allowed users to hide the origin and destination of their crypto assets for about a decade. However, The Internal Revenue Service accuses Russian-Swedish citizen Roman Sterlingov of having laundered more than 1.2 million bitcoin worth $ 336 million as a website administrator.
Sterlingov was arrested on April 27 in Los Angeles and The IRS estimates that at the time of each transaction it received commissions between 2% and 2.5% on the mixed services, which were worth roughly $ 8 million then, but exponentially more today.
The authorities appreciate that At least 23% of the bitcoin that flowed through the mixed service was transferred to darknet-based narcotics markets like the Silk Road.
Sterlingov’s arrest was the result of a careful dissolution by authorities of the network of BTC transactions related to the 2011 mixed serviceUsing the Bitcoin blockchain to identify the site operator.
Sterlingov started the website in late 2011 under a Japanese pseudonym that meant “Happy New Year” in order to rule out the possibility of the authorities “finding his payments.”and thus make it impossible to prove a connection between a deposit and a payout within our service. “
In 2019 Undercover IRS agents hired Sterlingov through the platform, claiming they wanted to launder the proceeds from ecstasy sales. Transactions are processed without a response.
The security forces were able to find out Sterlingov had paid for Bitcoin Fog’s server hosting costs with the now defunct digital currency Liberty Reserve, so they could track when he bought the Liberty Reserve with the transferred bitcoin from the collapsed Mt Gox crypto exchange..
From there, the IRS was able to identify the home address and phone number that Sterlingov had recorded on his account.and finally a Google Drive account which has the instructions outlining the steps to buy your Liberty Reserve coins.
“This is another example of how, with the right tools, researchers can use the transparency of cryptocurrencies to track the flow of illicit funds.”said Jonathan Levin, co-founder of Chainalysis, a blockchain forensics company.
The computer scientist Sarah Meiklejohn explained:
“In blockchain analysis, we keep saying that all of this activity is in this ledger forever, and if you did something wrong 10 years ago, you can get caught and be arrested for it today.” ???
Despite Sterlingov’s arrest, Bitcoin Fog is still onlinealthough it is not clear who is running the site.