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Over the past decade, criminals have increasingly turned to cryptocurrencies to cover up their illegal activities. Wired Reporter Andy Greenberg has covered their move since the beginning. his new book Tracer in the Dark: Global Hunt for Cryptocurrency Crime Lords However, it focuses on cryptocurrency scammers and criminal enemies. You’re a federal agent who uses the transparency of blockchain to carefully track and imprison villains.
The book, for example, tells the story of how blockchain tracking technology led to the arrest of 337 people who joined a horrifying dark web network for sharing child pornography. I believed my identity was secure because However, it is the open nature of Bitcoin transactions that makes it possible to track and arrest all transactions.
Greenberg’s book (Doubleday) reaches an era of rising cryptocurrency fraud, including the $400 million hack of the now-defunct exchange FTX. Greenberg spoke on the phone about the hack and the dangers of both online anonymity and surveillance.
An excerpt of the conversation is below.
What inspired you to write a book about tracking crime via blockchain?
Reports date back to 2011. Around that time, I was obsessed with this group called her Cypherpunks. This group is a libertarian movement that began in the 1990s with dreams of using cryptography to try and seize power from governments and corporations. give to individuals. That’s when I learned about what seemed to be a cypherpunk invention called Bitcoin.
The remarkable thing about Bitcoin at the time was that you could not only buy a cup of coffee, but you could put unmarked banknotes, like cash, in a briefcase and send them around the world without revealing your identity. Bitcoin seemed anonymous and untraceable. As someone who has been into this world of cybercrime and surveillance evasion, this seemed to unlock a whole new world of online crime, money laundering, drug dealing, and cybercrime.
It definitely happened. But it took me a decade to realize just how diametrically opposed untraceable Bitcoin really is. And at the hands of a small group of detectives, one large-scale cybercriminal operation went bankrupt, each bigger than the last.
Let’s talk about some big news at the moment: Founder of FTX this month Sam Bankman-Fried He admitted that his cryptocurrency exchange had mixed customer funds with those of his investment firm, Alameda Research. Why has no one found evidence of this on the blockchain so far?
In the midst of this golden age of crypto chasing where so many recognized villains have been tracked, identified through crypto chasing, prosecuted and imprisoned, this huge black hole of financial irresponsibility or negligence has brought us It’s fascinating to see what was happening before your eyes. But I avoided the notification.
I think partly because it was seen as a legitimate player in the crypto economy. It wasn’t a black market trying to escape surveillance. However, we do not know if the dangerous flow of funds from FTX to Alameda was confirmed on the blockchain, or if it was happening at another level in those companies’ accounting systems.
It’s worth noting that about $500 million of FTX’s funds were apparently stolen. It seems like a real crime in progress.
An interesting thing about the properties of crypto is that we can see a $500 million dollar amount moving on the blockchain. Many of the main characters in my book see that money in action. It would be very difficult for someone who stole that cryptocurrency from her FTX to cash out without being identified. You will almost certainly get an answer as to who stole the money.
We see this in so many robberies. Someone has stolen a huge amount and has a very difficult problem of what to do with it. Very often I see them frozen for years. The problem is not stealing it. It’s too easy. It’s getting around that and laundering that money in a way that can actually be spent on something.
Do you think most people using crypto in 2022 understand crypto’s lack of privacy?
The majority of cryptocurrency users probably don’t care if it’s anonymous or private. They are only buying it as a speculative investment. Those seeking financial privacy have found that most cryptocurrencies, and of course Bitcoin, are not private. This is partly due to the shift towards more private currencies such as Monero and Zcash. We also see it in the way the most prolific cryptocurrency criminals appear to be in places like Russia and North Korea where it doesn’t matter if they can be traced.
I think there is still a shrinking group of people who think they are one step ahead of law enforcement and surveillance. It’s all too easy to think you’re doing enough. And then there’s a whole industry of very smart, well-funded people whose job it is to surprise you and find ways to track the seemingly untraceable.
How have both law enforcement and independent tracking firms stepped up their game since the major mass reporting of your book took place?
When Tigran Gambarian [the IRS agent and investigator who is a main character of Greenberg’s book] When we followed the corrupt Secret Service agent, he was basically working by himself after hours and without any real tools. Now, as we look to 2022, an IRS criminal investigator routinely uses this technique to make his first, second, and third largest seizure of money in the history of the Department of Justice. I came. Probably every major law enforcement agency in the US, and possibly other law enforcement agencies around the world, have entire teams using this fluently. I know there are full-time crypto tracers within the FBI, DEA, and IRS.
But there is also an arsenal of tools created by an entire industry of companies, initially created by Chainalysis, the first startup to focus on tracking Bitcoin as a business. We currently compete daily with Elliptic, TRM Labs, CipherTrace, and more.
read more: Inside the Chess Game That Led the Federal Reserve to $3.6 Billion with Stolen Bitcoin
The cat-and-mouse game will continue to evolve. At the very least, that cat aspect is becoming very novel and cutting edge. They are all competing to come up with new technology to track people’s money.
It also means that these tools are commercialized. If you’re a law enforcement agency that doesn’t know how to track cryptocurrencies, there’s no need to learn. You just have to pay for a contract with one of these companies and they can give you very sophisticated tools to do it and train you how to do it.
At the end of your book, cryptography professor and tracking pioneer Sarah Mayclejohn expresses her fears about how this kind of power could be used by oppressive governments.
One scenario is that people may have wanted to use cryptocurrency as a way to pay for abortions in states where cryptocurrency is illegal. Now you can track it. Internationally, Russia, China, or other powerful repressive regimes use this tool to seek financial privacy or to raise funds for dissent and hostile journalism and activism. It’s even more tragic when you consider the way people who do it are cracked down.
Ethically speaking, this is definitely a complex function. I wouldn’t necessarily say Chainalysis or the US government abuse it. However, it is clear that at some point these capabilities will become available to an administration that we do not wish to give new oversight powers to.
When I was working on this book, I wasn’t comfortable telling the whole story from a law enforcement perspective. Lucky for me, Sarah plays the role of conscience in the story. She invented many of these technologies, but she decided not to work in the crypto tracking industry, she is a very thoughtful person and it is not always a good thing to be able to easily track cryptocurrencies. .
In August, the Ministry of Finance Licensed Tornado CacheA blockchain tool that protects your privacy. What do you think of this legal battle?
I don’t think the future of cryptographic privacy rests on the outcome of this one case. There are other decentralized mixing services, and tools such as ZCash and other alternative cryptocurrencies that already seem very difficult to track. As the adoption of these tools increases, new technical and policy battles will emerge around such things.
I think it’s still possible that non-traceable transactions are possible. And the world of true financial privacy may be yet to come, for better or worse. Some of them are definitely criminal.
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