For ten years, BITCOIN FOG has been providing services for cryptocurrency users with hidden sources and destinations, making it one of the most important economic institutions on the dark web. The U.S. Internal Revenue Service (IRS) stated that it finally identified the Russian-Swedish administrator behind the system and accused it of laundering hundreds of millions of dollars in Bitcoin, most of which ended up in the dark Internet drug market. What betrayed him? Wired writes, tracking his ten-year-old digital transaction.
US authorities arrested Roman Sterling in Los Angeles on Tuesday and accused him of laundering more than 1.2 million bitcoins during the 10 years of allegedly operating the bitcoin fog, valued at $336 million at the time of the transaction. According to data from the Criminal Investigation Department of the Internal Revenue Service (IRS), Sterlingov is a citizen of Russia and Sweden and allows users to merge their transactions with other transactions to prevent anyone from tracking their payments.
He charges a commission of 2% to 2.5% for these transactions. Based on the exchange rate at the time of each transaction, Sterling, as an IRS account, received a total of approximately $8 million worth of Bitcoin. Ironically, the 2011 transaction that Sterling allegedly used to host Bitcoin Fog servers seemed to attract IRS.
Jonathan Levin, co-founder of blockchain analysis company Chainalysis, said: “This is another example of how investigators with the right tools can use cryptocurrency transparency to track the flow of illegal funds.”
Bitcoin Fog is still online on Tuesday, but it is unclear if anyone maintains the site. The story of the criminal lawsuit against Sterling began with a website he created at the end of 2011 and promoted under the pseudonym Akemashite Omedetou, which means “Happy New Year” in Japanese. Omedetou advertised in a post on the BitcoinTalk forum that Bitcoin Fog “combines your Bitcoin with other users” and “it can eliminate any possibility of you discovering a payment, thus failing to prove that our deposit is related to There are any contact services between payments.”
Over the years, Bitcoin Fog has ransacked $336 million in accordance with the lawsuit, of which at least $78 million has been accumulated to various dark websites selling drugs, such as Silk Road, Agora and AlphaBay. It seems that in 2019, the Internal Revenue Service (IRS) used secret agents to trade with Bitcoin fog. In one case, he sent an email to a Bitcoin fog administrator in which he made it clear that he wanted to rob the proceeds of ecstasy. Bitcoin fog executed the user’s transaction unresponsively.
However, the most interesting is the US Internal Revenue Service (IRS) report on how to find the pound sterling, using the same type of blockchain analysis that his own service should bypass. According to reports, Sterling used the now defunct Liberty Reserve to host the Bitcoin Fog server at some point in 2011. Blockchain evidence shows that Sterling used Bitcoin to buy Liberty Reserve. He first worked on the former cryptocurrency exchange Mt. Gox and then transferred these bitcoins to the next few addresses, and finally sold them to Liberty Reserve at another exchange, which he will use to establish a bitcoin Foggy.
According to the monitoring of these financial transactions, the US Internal Revenue Service used Sterling’s home address and phone number for Mt. Gox’s accounts, and even used a Google account, which contained Russian documents in its Google Drive, which provided Instructions on how to fake bitcoin payments. The document accurately described the steps Sterling allegedly took to purchase the Freedom Reserve.
This case is another example. Bitcoin was once considered a powerful tool for performing anonymous transactions that cannot be traced, but it is often the opposite. Since the creation of cryptocurrency, blockchain records of all Bitcoin transactions have often provided services to the police department to track transactions that have been around for many years.
Sarah Meiklejohn, a computer scientist at University College London, said that the arrest of Bitcoin fog administrators based on blockchain analysis shows how far investigators can use currency tracking technology in the past. He established Bitcoin tracking technology in 2013.
“What I keep repeating is that blockchain analysis can keep all activities forever. If you did something wrong ten years ago, I can arrest you today,” Meiklejohn said, who still doesn’t understand why the Bitcoin fog is still online. The administrator has been arrested.
He pointed out that in the past, the police department has quietly taken over criminal activities on the dark web, and it is not clear why the criminal charges against the British pound were announced.
“At this point, anyone who wants to incorporate their cryptocurrency must assume that the service has been compromised,” McRay John told Wired.
In addition to this, it has become more difficult to spend and receive Bitcoin anonymously.