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

US authorities have arrested the alleged mastermind of a darknet-based BTC shuffling service, Bitcoin Fog, after analyzing 10 years of blockchain data.

The authorities have issued a warning to other users of illegal blocking systems: Anything you do today can continue to haunt you, as this activity will remain on paper forever, and increasingly sophisticated analysis technologies make it possible to track down crimes committed years ago.

For the past decade, Bitcoin Fog has allowed its users to hide the origin and destination of their crypto assets. However, the Internal Revenue Service has charged Roman Sterlingov, a Russian-Swedish national, with laundering more than $1.2 million in bitcoins while he was administrator of a website.

Sterling was born on the 27th. Arrested in April in Los Angeles; the IRS estimates he received commissions of 2 to 2.5 percent for shuffling services at the time of each transaction – worth about $8 million at the time, but exponentially more today.

Authorities estimate that at least 23 percent of the bitcoins that passed through the mixing service went to drug markets on the darknet, such as. B. Silk Road, were transferred.

Sterling was arrested by authorities, who quickly uncovered a network of BTC transactions linked to the 2011 Mixer service, using a Bitcoin blockchain to identify the site’s operator.

Sterling founded the site in late 2011 under the Japanese pseudonym Happy New Year and announced that Bitcoin Fog eliminated any chance of authorities finding your payments and that it was impossible to prove a link between deposit and withdrawal within our service.

In 2019, undercover IRS agents brought Sterling onto the platform, claiming they were seeking to launder profits from the sale of ecstasy. The transactions were processed without response.

Law enforcement officials were able to determine that Sterling had paid for hosting the Bitcoin Fog server with the now defunct digital currency Liberty Reserve, telling them that he had purchased Liberty Reserve with bitcoins he had siphoned off from the pioneering cryptocurrency exchange Mt. Gox, which has gone under.

From there, the IRS was able to find out the home address and phone number Sterling had stored on his account, and eventually a Google Drive account that contained instructions on the steps he had taken to purchase Liberty Reserve coins.

It’s another example of how, with the right tools, investigators can use the transparency of cryptocurrencies to monitor the flow of illicit funds, says Jonathan Levine, co-founder of blockchain forensics company Chainalysis.

Sarah Meiklejohn, a computer scientist, said:

With blockchain analytics, we keep saying that all of this activity is on this ledger forever, and if you did something wrong 10 years ago, you can be caught and arrested for it today.

Despite Sterling’s arrest, Bitcoin Fog remains online, but it is unclear who runs the site.

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