Crypto money laundering

For years, the cryptocurrency economy has been rife with black market sales, theft, ransomware, and money laundering—despite the strange fact that in that economy, practically every transaction is written into a blockchain’s permanent, unchangeable ledger. But new evidence suggests that years of advancements in blockchain tracing and crackdowns on that illicit underworld may be having an effect—if not reducing the overall volume of crime, then at least cutting down on the number of laundering outlets, leaving the crypto black market with fewer options to cash out its proceeds than it’s had in a decade. That intense narrowing of so-called “off-ramps” for crypto crime is a result of an ongoing government crackdown on crypto money laundering and a sign of additional enforcement on the way, says Kim Grauer, Chainalysis’ director of research. “It’s shocking to see some of these deposit addresses moving more than a hundred million dollars in illicit funds and still operating when it’s something that’s extremely transparent and easy to see with blockchain analytics,” Grauer says. “So it does seem like a good chokepoint, where we can shut down and profile and—to some degree—eradicate this activity.” Whether the overall amount of crypto crime rose or fell in 2022, meanwhile, is far from clear: By some measures, Chainalysis’ data has shown that “You don’t carry out a ransomware attack if there’s no way of converting that ransom into something usable,” says Grauer. “What we’re really...

In 2011, Verner and Bilyuchenko got access to the Mt. Gox users’ data and transactions database, along with the private keys for the exchange’s crypto. Between 2011 and 2014, Verner, Bilyuchenko and the unnamed co-conspirators funneled no less than 647,000 bitcoin out of the Mt. Gox wallets, the indictment released this week says. To liquidate the stolen bitcoin, Verner and Bilyuchenko used U.S. companies, the indictment says, though the document does not name particular firms that might have been involved. The investigation report unsealed by the Department of Homeland Security (DHS) this week mentions transactions between BTC-e and BitInstant and Memory Dealers, two early and now-defunct bitcoin companies. The wire payments from BitInstant and Memory Dealers were labeled as an “Internet Advertisement Agreement,” but BTC-e did not provide any advertising services to BitInstant or Memory Dealers, the investigators found. The BTC-e operators would also send money from their bitcoin sales through multiple PayPal accounts to conceal their origins, the report says. Andrey Nikonorov, who was also a co-founder of the ZrCoin crypto project, told CoinDesk today he knew Vinnik but was merely a user of BTC-e and provided the exchange with his identifying documents to be able to conduct a bank transfer. He also believes that Vinnik himself was just an employee of BTC-e who did not come across as a wealthy business owner at all. Users included the ransomware gang CryptoWall an...

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On Tuesday, Ilya Lichtenstein and Heather Morgan were arrested in New York and accused of laundering a record $4.5 billion worth of stolen cryptocurrency. In the 24 hours since, the cybersecurity world has ruthlessly mocked their operational security screwups: Lichtenstein allegedly stored many of the private keys controlling those funds in a cloud-storage wallet that made them easy to seize, and Morgan flaunted her “self-made” wealth in a But those gaffes have obscured the remarkable number of multi-layered technical measures that prosecutors say the couple did use to try to dead-end the trail for anyone following their money. Even more remarkable, perhaps, is that federal agents, led by IRS Criminal Investigations, managed to defeat those alleged attempts at financial anonymity on the way to recouping $3.6 billion of stolen cryptocurrency. In doing so, they demonstrated just how advanced cryptocurrency tracing has become—potentially even for coins once believed to be practically untraceable. “What was amazing about this case is the laundry list of obfuscation techniques [Lichtenstein and Morgan allegedly] used,” says Ari Redbord, the head of legal and government affairs for TRM Labs, a cryptocurrency tracing and forensics firm. Redbord points to the couple's alleged use of "chain-hopping"— transferring funds from one cryptocurrency to another to make them more difficult to follow—including exchanging bitcoins for "privacy coins" like monero and dash, both designed to foi...