The US Cracked a $3.4 Billion Crypto Heist - and Bitcoin's Anonymity (wsj.com) 59
Federal authorities are making arrests and seizing funds with the help of new tools to identify criminals through cryptocurrency transactions. From a report: James Zhong appeared to have pulled off the perfect crime. In December 2012, he stumbled upon a software bug while withdrawing money from his account on Silk Road, an online marketplace used to hide criminal dealings behind the seemingly bulletproof anonymity of blockchain transactions and the dark web. Mr. Zhong, a 22-year-old University of Georgia computer-science student at the time, used the site to buy cocaine. "I accidentally double-clicked the withdraw button and was shocked to discover that it resulted in allowing me to withdraw double the amount of bitcoin I had deposited," he later said in federal court. After the first fraudulent withdrawal, Mr. Zhong created new accounts and with a few hours of work stole 50,000 bitcoins worth around $600,000, court papers from federal prosecutors show.
Federal officials closed Silk Road a year later on criminal grounds and seized computers that held its transaction records. The records didn't reveal Mr. Zhong's caper at first. Authorities hadn't yet mastered how to track people and groups hidden behind blockchain wallet addresses, the series of letters and numbers used to anonymously send and receive cryptocurrency. One elemental feature of the system was the privacy it gave users. Mr. Zhong moved the stolen bitcoins from one account to another for eight years to cover his tracks. By late 2021, the red-hot crypto market had raised the value of his trove to $3.4 billion. In November 2021, federal agents surprised Mr. Zhong with a search warrant and found the digital keys to his crypto fortune hidden in a basement floor safe and a popcorn tin in the bathroom. Mr. Zhong, who pleaded guilty to wire fraud, is scheduled to be sentenced Friday in New York federal court, where prosecutors are seeking a prison sentence of less than two years.
Mr. Zhong's case is one of the highest-profile examples of how federal authorities have pierced the veil of blockchain transactions. Private and government investigators can now identify wallet addresses associated with terrorists, drug traffickers, money launderers and cybercriminals, all of which were supposed to be anonymous. Law-enforcement agencies, working with cryptocurrency exchanges and blockchain-analytics companies, have compiled data gleaned from earlier investigations, including the Silk Road case, to map the flow of cryptocurrency transactions across criminal networks worldwide. In the past two years, the U.S. has seized more than $10 billion worth of digital currency through successful prosecutions, according to the Internal Revenue Service -- in essence, by following the money. Instead of subpoenas to banks or other financial institutions, investigators can look to the blockchain for an instant snapshot of the money trail.
Federal officials closed Silk Road a year later on criminal grounds and seized computers that held its transaction records. The records didn't reveal Mr. Zhong's caper at first. Authorities hadn't yet mastered how to track people and groups hidden behind blockchain wallet addresses, the series of letters and numbers used to anonymously send and receive cryptocurrency. One elemental feature of the system was the privacy it gave users. Mr. Zhong moved the stolen bitcoins from one account to another for eight years to cover his tracks. By late 2021, the red-hot crypto market had raised the value of his trove to $3.4 billion. In November 2021, federal agents surprised Mr. Zhong with a search warrant and found the digital keys to his crypto fortune hidden in a basement floor safe and a popcorn tin in the bathroom. Mr. Zhong, who pleaded guilty to wire fraud, is scheduled to be sentenced Friday in New York federal court, where prosecutors are seeking a prison sentence of less than two years.
Mr. Zhong's case is one of the highest-profile examples of how federal authorities have pierced the veil of blockchain transactions. Private and government investigators can now identify wallet addresses associated with terrorists, drug traffickers, money launderers and cybercriminals, all of which were supposed to be anonymous. Law-enforcement agencies, working with cryptocurrency exchanges and blockchain-analytics companies, have compiled data gleaned from earlier investigations, including the Silk Road case, to map the flow of cryptocurrency transactions across criminal networks worldwide. In the past two years, the U.S. has seized more than $10 billion worth of digital currency through successful prosecutions, according to the Internal Revenue Service -- in essence, by following the money. Instead of subpoenas to banks or other financial institutions, investigators can look to the blockchain for an instant snapshot of the money trail.
Pseudo-anonymous. (Score:5, Informative)
Pseudo-anonymous at best. [cnbctv18.com]
Re: (Score:2)
Either that or the interstate commerce clause
Re: (Score:3)
Seems like you're implying that it's not a crime.
Re:The good ole standby... (Score:5, Insightful)
Seems like you're implying that it's not a crime.
He's implying that "Wire Fraud", as defined in US law, is nebulous at best and can be stretched to cover a range of non-criminal activities. And he's probably right. With our insane, nearly endless catalog of laws, the government really can find you guilty of something if they look hard, and creatively, enough.
Re:The good ole standby... (Score:5, Informative)
In this case, cheating the online system is illegal and it is fraud, even if it's bitcoin. "Wire fraud" is fraud that is being done over the phone, internet, or some other telecommunications. It's stll fraud regardless of the means.
Re: (Score:1)
obligatory quote:
(Eventually it was discovered that God did not want us to be all the same. This was BAD NEWS for the Governments of The World as it seemed contrary to the doctrine of Portion Controlled Servings. Mankind must be made more uniformly if THE FUTURE was going to work. Various ways were sought to bind us all together, but, alas SAMENESS was unenforceable. It was about this time that someone came up with the idea of TOTAL CRIMINALIZATION based on the principle that if we were ALL crooks, we could at last be uniform to some degree in the eyes of THE LAW. Shrewdly our legislators calculated that most people were too lazy to perform a REAL CRIME. So new laws were manufactured, making it possible for anyone to violate them any time of the day or night, and, once we had all broken some kind of law, we'd all be in the same big happy club, right up there with the President, the most exalted industrialists, and the clerical big shots of all your favorite religions. TOTAL CRIMINALIZATION was the greatest idea of its time and was vastly popular, except with those people who didn't want to be crooks or outlaws. So, of course, they had to be TRICKED INTO IT... which is one of the reasons why music was eventually made Illegal.)
Wire fraud isn't nebulous (Score:5, Informative)
There's nothing nebulous (read: unclear, uncertain) about wire fraud -- it's in the name; it's over electrical/electronic wires (there's a cable connecting any two junction points anyway).
Do you know what's NOT COVERED by current laws? Long-distance telepathic relay. Where the transaction occurs telepathically through multiple middlemen who otherwise have no direct connection to each other! This method would leave no trace.
Re: (Score:2)
Really? Because in my experience, all criminal cases involved with wire fraud seem to be desperate to charge the defendant with something, ANYTHING!, because there are no other laws more specific to the crime.
It's just like charging drug users for possessing "drug paraphernalia" when they own a spoon, because the prosecutors KNOW they must be smoking crack, but dammit there just isn't any better evidence around to convict them!
Re: (Score:2)
Just because you may not agree with $3.4 BILLION in wire fraud, that doesn't mean the concept of wire fraud is nebulous.
Re: (Score:2)
It is nebulous, and it's regularly abused.
Re: (Score:2)
There are plenty of valid reasons to complain about our govt. but in this case, the guy stole money that wasn't his. And it was a lot of money. So yeah, it is going to attract attention.
Re: (Score:3)
The problem isn't the laws themselves (Score:2)
Weak application of laws will not hold up in court. BUT, cops can lock you in a room and tag team you for 16 hours with threats of 30+ years in prison. At some point you slip up or just want to go home. They can and will lie to you
Re: (Score:3)
Ah, good ole "straw man", the reliable tool that sloppy Slashdotters use when they can't come up with an actual argument against something.
Re: (Score:2)
I could easily come up with arguments against wire fraud. Do you know why? Because 10% of slashdot stories about crime seem to involve defendants who were charged solely of wire fraud, and nothing more substantive.
I've had A LOT of time to think about why prosecutors can't seem to come up with any charges more specific to the crime. Have you?
Re: (Score:2)
Re: (Score:1)
Someone is collecting the addresses here at least...
https://www.reportbitcoinabuse... [reportbitcoinabuse.com]
Re: (Score:2)
What about the guy emailing me that he's going to publish video of me watching porn video if I don't deposit coins in his wallet?
You need to be careful. That guy is a professional hacker and successfully hacked your operating system. He even made a video compilation which shows scenes of you happily masturbating.
Easy Mark (Score:2)
Re: (Score:3)
Greed was the downfall. Again.
He should have converted it real money in a bank account in the Bahamas then disappeared to lead a life of cocaine and hookers.
Now he's looking at two years of violence before being thrown out on the street with nothing but a criminal record to his name.
How do people not understand this simple concept?
Re: (Score:3)
They will simply auction it off. That's what they've done previously
Re: (Score:1)
Uh, multiple terrible errors in the article (Score:3)
- Bitcoin was never anonymous, it was pseudonymous. As long as you are only a pseudonym, they cannot find you. But the moment you make a mistake and link your pseudonym to your real identity, your anonymity is over
- There are other money-like coins that have more anonymity than BTC, like Bitcoin Cash which has Cash Fusion and Monero which has black-box anonymity
- Due to high fees, it became unfeasible to have any pseudonimity on BTC blockchain, since about 2015. This is the reason another project was branched off and forked, called Bitcoin Cash, which is basically Bitcoin but working like BTC did in 2015 and has significantly better fungibility, anonymity and money-like values due to low fees which enables mixing
Author of the article has some reading to do I guess.
Re: (Score:2)
Nobody in their right mind treats BTC as anonymous these days.
Re: (Score:2)
Please elaborate on the 2015 changes, and what makes block chain not anonymous beyond the need for signatures to stop the double spend? (Assuming all signatures are with single use private keys.)
Anonymous (Score:2)
Private and government investigators can now identify wallet addresses associated with terrorists, drug traffickers, money launderers and cybercriminals, all of which were supposed to be anonymous.
Satoshi may or may not have been a US intelligence agency, but the idea that Bitcoin was ever anonymous had to have been an intentional psyop. That strange belief was kept alive far longer than it should have survived after the earliest busts started.
Re: (Score:2)
It's the "can't happen to ME" syndrome...
Re: (Score:2)
The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the "tape", is made public, but without telling who the parties were.
Definition of public may not include cops. The example is clear, random people can't know who is trading on stock exchange, feds or the exchange owners can.
Re: (Score:2)
Re: (Score:2)
See also TOR.
Cops have been steadily arresting pedos using TOR for a long time now. Combination of traffic analysis and compromised hosts deploying torbrowser zero days I assume.
Statute of limitations says No (Score:5, Interesting)
https://www.federalcharges.com... [federalcharges.com]
According to US Code 18 Section 3282, the statute of limitations for the majority of crimes is five years.
This is not one of the excluded charges.
Crime committed in Dec 2012. It is now well into 2023. Go fuck yourself with a screwdriver. I hope he uses his money for literally anything he wants -- he earned it.
Re: (Score:3)
Keyword, "majority of crimes"
He's charged with wire fraud. IN certain situations, the statute of limitation is 10 years.
The first instance of the crime was in December 2012, but his activities continued into 2013.
Finally, federal statute of limitations were extended for at least 76 days due to COVID.
So early 2013, plus 10 years is early 2023, plus another 3 months and... welp! Too bad, so sad.
=Smidge=
Re:Statute of limitations says No (Score:4, Informative)
More significantly, the statute of limitations starts counting from the LAST use of an interstate communication system to further the scheme. Those eight years he spent moving that bitcoin around were eight years he spent resetting the clock for prosecution.
Re: (Score:2)
I hope he uses his money for literally anything he wants -- he earned it.
This is a usage of the word "earned" that I haven't heard before. Is ripping off your drug dealer considered honest labor now?
Bitcoin never had anonymity (Score:2)
That is just one more of the lies used to push it.
Re: (Score:3)
Another lie. Not a direct one, sure, but the idea of a "core community" with this behavior is entirely made up. Who did say from the beginning that BC was not anonymous were some of the techies in there. Most people that wanted to sell it claimed it was anonymous.
Well, you calling me a "hater" already makes it clear you are not interested in truth.
Re: (Score:1)
Wrong. https://satoshi.nakamotoinstit... [nakamotoinstitute.org]
Here's an idea - don't say stupid things that are so easy to search. This could have taken you less than five minutes to know that you are wrong, but you instead doubled down on your bias. Way to make the world a worst place - Congrats!
Re: (Score:2)
Bitcoin 101: "Immutable ledger recording every transaction since the beginning".
If at any point past, present, or future your identity is linked to a transaction, that can be traced through the ledger to see everything you ever did. ...So yes, just another of the many lies the cult pushes.
Re: (Score:2)
Indeed. You would think that having the full transaction history available to everybody is a big red flag. But apparently for many people that is already too complex to understand.
It's meant to be traded not cashed in (Score:3)
And what this article shows is that the government can weigh in on these exchanges to get information about transactions and identities.
Re: (Score:2)
No it in anonymous until you use it at all, for example if you buy from amazon (if amazon takes bitcoin) and amazon knows your name/address then the government can get that information. Or use it at local bar, they get the time and go get video footage and narrow it down a lot, do it 2 or 3 times assuming bitcoin use is popular they will have you. If you are just trading bitcoin you are probably fine as.
Re: (Score:2)
for example if you buy from amazon (if amazon takes bitcoin) and amazon knows your name/address
It's called a "dead drop". Of course if you have contraband delivered to your home address, the jig is up.
Many years ago, I lived in an apartment building with a bunch of mailboxes out front. It wasn't very long before I realized that they had more mailboxes than apartments. And some people I didn't recognize as tenants would drive up, pick up some mail and leave.
Logic seems kinda odd (Score:2)
Re: (Score:2)
Yeah I was just thinking that. So this guy steals money from other crooks, where it likely was laundered from ill-gotten gains. And charged with fraud? Not something to do with money laundering or possession of stolen merchandise? Interesting.
Re: (Score:1)
Re: (Score:2)
Citation needed.
Re: (Score:1)
Prison sentence of less than two years (Score:3)
prosecutors are seeking a prison sentence of less than two years.
The light sentence is just a formality to justify shaking the dude down for $3.4 billion. Quite the heist, and perfectly legal if they can get a conviction.
Arms vs armor 2.0 (Score:2)
Anonymous web anything is a total impossibility given the rise of camera presence and connection monitoring. Just as arms will always defeat armor, so will governments defeat anonymity. Itâ(TM)s just a matter of relative value.
Slashdot at it's best (Score:1)
These posts are usually drowning in "bitcoin is anonymous" comments. Pretty hilarious to watch all you flip your narrative so quickly when the headline cuts straight to how incorrect you all were all these years.
Dear reader, search the /. archives before you waste your votes