Bitcoin As A Government Surveillance And Tracking Tool

[alphastrength50]

This is great info. People do not realize that Bitcoin makes tracking transitions so easy. Also if a tor user uses the same address from their BTC several times to similar locations, the tor will be revealed and compromised. I'm not sure why people aren't using Monero which is way more secure with their own system generated loops for preventing tracking

 

[NewbieMaria]

If Coin Validation succeeds, you can expect the names of many drug (AAS) dealing sources to be entered into the database. If there customers didn't take anonymity measures in sending Bitcoin, they could be directly linked to illegal activity especially if their names appear in the database for any reason. Since the bitcoin blockchain is a public ledger, it means that the record is forever. So 10 years from now, long after one may have forgotten about a bitcoin-related steroid purchase, a company like Coin Validation may have made the connection.

Everything on the internet has footprints

 

[bryan_usa]

Everything on the internet has footprints

I wonder why privacy coins like Monero haven't become the defacto digital currency? I'm sure everyone using crypto wants some level of privacy/anonymous transactions.

 

[Millard]

So 9 years ago, I warned you that Bitcoin is not anonymous and had the potential to be a good government surveillance and tracking tool. And there were private companies seeking to help governments fill that role.

I've since repeatedly warned about the futility (my euphemism for stupidity) of the ubiquitous advice of protecting your anonymity by just simply "sending your bitcoin to another wallet" after buying from an exchange and before sending it to a vendor.

But for whatever reason(s), most seem to dismiss this advice.

Anyway, I thought I'd post some news article with recent information about the private companies that are linking real-life identities with associated Bitcoin addresses at the behest of the federal government. Really, there is one dominant go-to player in this category: Chainalysis

Chainalysis - Wikipedia

en.wikipedia.org

 

[Millard]

Blockchain detectives: Mt. Gox collapse saw birth of Chainalysis​

Chainalysis has become the go-to company for combing through the blockchain. But not everyone agrees with their methods.

Article excerpts:

Chainalysis has become the go-to tracing solution for some of the best-known law enforcement organizations worldwide and has helped the IRS seize an estimated $10 billion worth of cryptocurrency related to criminal investigations. IRS Criminal Investigations (IRS-CI) Chief Jim Lee says the tools it offers are invaluable to trace cryptocurrency and interrogate data in myriad settings, from blockchains to darknet marketplaces.
Think about all the data that I have working for the IRS. It may not be the most, but it’s the richest. Now I can take all this other data we have and then match it up against the records that I have. I mean, it’s just incredibly powerful, but it takes time, energy and money.”
[...]

Despite the controversy, Chainalysis has a lot of happy customers and has played a big role in the recovery of hacked funds. Erin Plante, VP of investigations at Chainalysis, manages a growing team of more than 120 investigators across 11 countries.

[...]

Plante notes that it is fairly straightforward to trace stolen funds through cross-chain bridges, with criminals typically converting tokens to ETH and then BTC, which is sent to mixers in an effort to obfuscate funds.

She says that mixers require significant amounts of liquidity to properly obfuscate funds, which has predominantly left Bitcoin mixers as the main option for criminals to launder money.

Chainalysis has a dedicated data intelligence team using specific tools to identify mixers using an algorithm that clusters wallets that are associated with the mixer service. An example of the algorithm at work was helping cluster some 50,000 addresses that were linked to the now sanctioned Sinbad mixer.

Plante reveals that Chainalysis had its clustering algorithm independently confirmed by a separate, covert FBI investigation that had been making use of dusting to trace how funds were being obfuscated by Chipmixer, another service that is widely believed to be the direct predecessor of Sinbad and its funds. Chipmixer was shut down in March 2023 over allegations that it had facilitated $3 billion in money laundering.

Source: Blockchain detectives: Mt. Gox collapse saw birth of Chainalysis

 

[Millard]

The Crypto Detectives Are Cleaning Up​

Early adopters thought cryptocurrencies would be free from prying eyes. But tracking the flow of funds has become a big business.

Article exerpts:

At the center is the New York analytics start-up Chainalysis, which was valued at $8.6 billion after a funding round last year. With tens of millions of dollars in federal contracts, Chainalysis has built a reputation as one of the crypto industry’s leading detectives — a team of blockchain analysts that helps the government track crypto transactions.

[...]
From the government’s perspective, Chainalysis is arguably the most trusted company in the industry — but only because it sells powerful tools aimed at penetrating the veil of secrecy that made crypto attractive in the first place.

Jonathan Levin, one of the co-founders of Chainalysis, saw a path for professional advancement in cryptocurrency, but none of his Oxford professors would supervise his research into it.

The blockchain is “oftentimes the key to unlocking a case,” said Jonathan Levin, 32, one of the founders of Chainalysis. “It’s more traceable and more conclusive.”

[...]
In total, Chainalysis has active contracts with the federal government worth about $65 million, according to an analysis of federal records by Jack Poulson, the executive director of the nonprofit Tech Inquiry, which tracks contracts.
[...]
One of Chainalysis’s government clients is Immigration and Customs Enforcement, which has an active contract with the company worth a total that could rise to roughly $12 million, according to federal records. An I.C.E. spokesman did not respond to requests for comment; Mr. Gronager, the Chainalysis founder, said the agency tracks blockchains to combat drug trafficking, and that he’s not aware of any cases in which I.C.E. has used his company’s tools for immigration enforcement.

To privacy advocates, the company’s relationship with I.C.E. looks like a slippery slope.

Source: The Crypto Detectives Are Cleaning Up

 

[Millard]

Philip Martin, the chief security officer at Coinbase, explains why cryptocurrency is an extremely powerful tool for law enforcement, and promotes the fact that Coinbase works closely with law enforcement to stop illicit activity.

"The reality is that crypto is a powerful tool to track and stop criminals, which is why most crooks avoid using it...

"The fact that we can easily identify and trace illicit activities is proof that blockchain can actually help law enforcement..

"Contrast that [cash] to blockchain technology, which underpins all cryptocurrencies, and offers law enforcement agencies an unprecedented level of transparency. Every transaction is permanently recorded on a public ledger, making it infinitely more traceable than cash. This transparency can be leveraged to track and dismantle criminal networks at a speed unmatched by any other financial technology.

"For example, our Global Intelligence team at Coinbase worked closely with the Metropolitan Police in London following a violent home invasion where a smart contract developer was forced to transfer crypto to assailants. Blockchain analysis quickly traced the stolen funds, leading to an ongoing investigation into the perpetrators. This case exemplifies how blockchain can turn the tide in favor of law enforcement.

"Our partnership with law enforcement has led to significant victories. In April 2023, Hamas’ military wing, the Al-Qassam Brigades, ceased Bitcoin fundraising because it was too easily traced by Israeli intelligence using blockchain analytics. Similarly, the Israeli government seized $1.7 million in crypto from wallets linked to Hezbollah, thanks to tools provided by Chainalysis.

"Coordinated efforts with Homeland Security also led to the identification and arrest of a major player in a phishing scam that targeted over 1,000 Coinbase users, resulting in the recovery of $28.6 million. Each of these cases underscores a crucial point: crypto is not the enemy; it is a formidable ally in the fight against illicit activities...

"Cryptocurrency’s transparency is uniquely suited to be a tool for stopping criminal activity, not enabling it. Unlike traditional financial systems, which are shrouded in secrecy by design, blockchain networks keep everyone honest. For example, recent joint exercises between Coinbase and law enforcement quickly identified over 1,450 potential victims across the ecosystem and traced millions of dollars in suspected illicit funds, demonstrating crypto’s potential in crime prevention."

Source: When it comes to crime, crypto is a powerful tool for law enforcement

 

[Benf15harp]

Good ‘ol Bitcorn.

 

[eryximachus]

There is a great deal of circumstantial evidence that bitcoin was created by the NSA, at least initially as an alternative to physical cash for so-called "hot money" transactions overseas. I was on the fence about this until bitcoin ETFs got approved and the big boys like Blackstone et al got into it.

A blockchain ledger has always seemed like something perfect for a sovereign currency issuer of immense power like the United States, and the administrative prohibition of Monero many years ago supported this.

I've been out of the game of buying anything using crypto, and it's probably safe to buy gear as it's clearly a low priority target for LE. But had someone told me back in 2019 that Monero would become LESS useful five years later... I would have been shocked.