US Arrests Alleged Crypto Mixer
Law enforcement officers in the United States have arrested a man on suspicion of laundering hundreds of millions of dollars’ worth of Bitcoin (BTC) through a cryptocurrency mixing service.
A crypto-mixing service—also known as a cryptocurrency
tumbler—obscures the original source of potentially identifiable or
"tainted" cryptocurrency by jumbling it up with other funds in a
single pool.
An arrest warrant for Roman Sterlingov was successfully
executed in Los Angeles, California, on April 27 and filed in the United States
District Court for the District of Columbia on the same day.
The warrant accuses dual Russian and Swedish citizen Sterlingov
of unlicensed money transmission, money laundering, and transmitting money
without a license.
Sterlingov was arrested by special agent to the Internal
Revenue Service Devon Beckett, who had been tasked with investigating the
Bitcoin Fog darknet money-laundering service allegedly operated by Sterlingov.
In an affidavit, Beckett describes how Bitcoin Fog's
administrator publicly advertised the organization's cryptocurrency mixer
service "as a way to help users obfuscate the source of their
Bitcoin" on a Twitter page and through a clearnet site.
Using blockchain analysis, law enforcement confirmed that
over 1.2 million BTC valued at approximately $335,809.383 has been sent through
the Bitcoin Fog site since it was established in October 2011.
IRS-CI cyber-analysts determined that Bitcoin Fog received
approximately 486,861.69 BTC valued at the time as approximately $54,897,316.44
directly from darknet markets.
"Historically, the largest senders of BTC though
Bitcoin Fog have been darkness markets, such as Agora, Silk Road 2.0, Silk
Road, Evolution, and AlphaBay, that primarily trafficked in illegal narcotics
and other illegal goods," wrote Beckett.
Through an undercover transaction performed in September
2019 plus some analysis, an IRS special agent was able to determine that the
crypto-tumbling service offered by Bitcoin Fog worked effectively to break the
link in the blockchain between the source and ultimate destination of funds
sent.
A second undercover transaction carried out in November 2019
revealed that Bitcoin Fog released funds to a user after being informed by that
user that the money was the proceeds of illegal drug sales.
Beckett wrote that analysis of Bitcoin transactions, financial
records, internet service provider records, email records, and additional
investigative information identified Sterlingov as the principal operator of
Bitcoin Fog.
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