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Stop The Bitcoin FUD: Criminal Cryptocurrency Transactions Are Falling

20/01/2021 by Idelto Editor

Despite a 2020 that saw the price of bitcoin rise to all-time highs and set new records for stability, it isn’t too difficult to find Bitcoin FUD being spread. But recently released blockchain analysis demonstrates that the “bitcoin is for criminals” narrative is weaker than ever.

The FUD Keeps Coming

Yesterday, Janet Yellen, the incoming nominee for U.S. treasury secretary, highlighted a common narrative that many believe shines an unfair light on the original cryptocurrency, suggesting that the government will try and regulate its use.

“I think many [cryptocurrencies] are used — at least in a transaction sense — mainly for illicit financing,” Yellen said. “And I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels.”

Last week, European Central Bank President Christine Lagarde said that bitcoin is a “highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money laundering activity.”

Even some industry-focused publications have been spreading the “bitcoin is for criminals” FUD, without acknowledging the facts that criminals have been using fiat cash for much longer, that supposedly regulated financial institutions frequently facilitate major crimes, that anonymous cryptocurrencies would be much more useful for criminals than bitcoin or that there are many other arguments that suggest this narrative is unfair.

Cryptocurrency Is Leaving Criminals Behind

According to a summary of blockchain analysis firm Chainalysis’ “2021 Crypto Crime Report,” the proportion of cryptocurrency-related crime fell significantly last year.

“In 2019, criminal activity represented 2.1 percent of all cryptocurrency transaction volume, or roughly $21.4 billion worth of transfers,” the firm found. “In 2020, the criminal share of all cryptocurrency activity fell to just 0.34 percent, or $10.0 billion in transaction volume.”

To put it another way: Cryptocurrency transaction volume that Chainalysis could identify as “criminal” accounted for just 2.1 percent of all transactions in 2019 (though Yellen seems confident in saying that the technology is “mainly for illicit financing”), by far the highest proportion that Chainalysis has found since 2017. Across 2020, that figure was down to less than half of 1 percent, fueled in no small part by a sharp rise in overall economic activity.

Chainalysis did note that cryptocurrency-fueled ransomware activity grew 311 percent in 2020, compared to 2019, and that even this figure is probably low due to underreporting. But this still represented only 7 percent of the total funds received by criminal cryptocurrency addresses, which itself is a very small proportion of all cryptocurrency transactions across the year. Funds received through scams and darknet marketplaces were by far the leading categories for criminal transactions in 2020.

It may be unlikely that the picture painted by this report will significantly alter regulators’ opinions of Bitcoin, or eliminate the appeal of FUD-focused headlines and media coverage. But there is a clear story being told by Bitcoin’s 2020, even if it’s not the narrative everyone will adopt: BTC’s journey to global reserve currency status will always outpace its use on the fringes of the dark web.

The post Stop The Bitcoin FUD: Criminal Cryptocurrency Transactions Are Falling appeared first on Bitcoin Magazine.

Filed Under: Bitcoin Magazine, Blockchain Analysis, Chainalysis, Criminal Activity, dark web, English, FUD, Regulation

“World’s Largest” Darknet Marketplace Has Been Shut Down

12/01/2021 by Idelto Editor

Popular darknet marketplace DarkMarket, which hosted an estimated half million users, was shut down by German police authorities in a raid conducted over the weekend. 

Announcements from prosecutors in the cities of Koblenz and Oldenburg indicated that the operator of the marketplace was headquartered somewhere near the border between Germany and Denmark. The marketplace’s server was officially turned off yesterday.

“Police in the northern city of Oldenburg ‘were able to arrest the alleged operator of the suspected world’s largest illegal marketplace on the darknet, the DarkMarket, at the weekend,’ prosecutors said in a statement,” according to Barron’s.

The illegal marketplace for drugs, SIM cards, stolen and fake credit card data, counterfeit money and more reportedly ramped up in usage this past year as many dealers had to take their businesses online due to the COVID-19 pandemic.

With just a few clicks of a button, customers could buy what they pleased from any of the 2,400-plus vendors on the marketplace by paying with the censorship-resistant currency bitcoin. There was a total of 4,650 BTC and 12,800 of the shitcoin XMR involved in over 320,000 transactions facilitated by the marketplace, according to prosecutors.

Darknet marketplaces have long been active use cases for bitcoin. Bitcoin’s censorship-resistant qualities assure that users can rely on it to buy goods on the black market, regardless of third-party restrictions or global borders. It should be noted, however, that the use of bitcoin is pseudonymous, not completely anonymous.

The post “World’s Largest” Darknet Marketplace Has Been Shut Down appeared first on Bitcoin Magazine.

Filed Under: Bitcoin Magazine, dark web, Darkmarket, English, Germany

Authorities Shut Down Darknet Marketplace Sipulimarket, Seize Bitcoin

14/12/2020 by Idelto Editor

Authorities Shut Down Sipulimarket Darknet Marketplace, Seize Bitcoin

A major darknet marketplace, Sipulimarket, has been shut down and its assets, including bitcoin, were seized by Finnish Customs, in cooperation with Europol and the Polish police.

Darknet Marketplace Shut Down, Bitcoin Seized

Europol and Finnish Customs (Tulli) announced last week that they “have shut down the Sipulimarket dark web marketplace and seized all its content.” The operation was in close cooperation with the Polish Provincial Police Headquarters in Wroclaw (Komenda Wojewódzka Policji we Wroclawiu), Europol’s European Cybercrime Centre (EC3), and Eurojust.

Tulli’s press release explains:

Finnish Customs has seized the web server and contents of the Silpulimarket trade site in its entirety … Finnish Customs has also carried out a bitcoin seizure.

The website now displays a “This domain has been seized” message that reads: “This hidden service has been closed by the Finnish Customs in conjunction with the Cybercrime Department of Provincial Police Headquarters in Wroclaw with the support of Europol and Eurojust for aggregated narcotics offenses.”

The authority described that the Sipulimarket webserver was operational in the Tor network since 2019. The marketplace sold “Significant amounts of narcotics and other illicit goods,” the announcement adds, noting that Sipulimarket was the only actual Finnish-language trade site selling narcotics in the Tor network after the trade site Silkkitie (Valhalla) was closed down by Finnish Customs in the spring of 2019.

The amount of bitcoin seized was not disclosed. The announcement concludes: “The preliminary investigation of the case is still underway. At this stage, Finnish Customs and the international cooperation partners will not provide any more information on the matter.”

What do you think about the authorities seizing Sipulimarket? Let us know in the comments section below.

The post Authorities Shut Down Darknet Marketplace Sipulimarket, Seize Bitcoin appeared first on Bitcoin News.

Filed Under: dark net, dark web, darknet marketplace, darknet marketplace seized, English, Europol, finland, News, News Bitcoin, Sipuli market, Sipulimarket, Sipulimarket bitcoin, Sipulimarket seized

The Long and Winding Story of Silk Road, Bitcoin’s Earliest Major Application

01/10/2020 by Idelto Editor

This article originally appeared in Bitcoin Magazine‘s 10th anniversary print edition.

Silk Road, the online marketplace named for the historic network of trade routes established during the Han Dynasty, went live in February 2011. Its domain was accessible only on the so-called “dark web” via the encrypted and anonymous network software Tor. This eBay for the internet’s underworld was the first of its kind: a clandestine marketplace for the buying and selling of (mostly) illicit substances with bitcoin. 

It put bitcoin in the hands of countless new users, demonstrated firsthand what could really be possible with decentralized currency and served as Bitcoin’s first significant use case.

For many in the Bitcoin space, Silk Road has become a touchstone for Bitcoin’s utility and its role as a foil to the mainstream economic system. And, adding to this symbolism, its founder, Ross Ulbricht, was arrested and the site was shut down by federal authorities less than three years after it launched. In 2015, Ulbricht was sentenced to double life in prison plus 40 years without the possibility of parole for money laundering, computer hacking, conspiracy to traffic fraudulent identity documents and conspiracy to traffic narcotics by means of the internet. 

Four years later, the facts around Ulbricht’s arrest and conviction are still fuzzy. While the case may be closed, the true identity of Dread Pirate Roberts (DPR) — the handle for Silk Road’s infamous operator and the root of many accusations against Ulbricht during his trial — is anything but resolved. Ulbricht has said that he sold the site before DPR took the helm, and his legal defense and one former Silk Road employee have said that multiple people had access to the account. But the prosecution hoisted the legal blame for all of DPR’s online activities on Ulbricht. 

This intractability of online identities has been a major source of contention in the saga of Silk Road. And the unresolved tension is a major reason why, despite its short-lived history and the punishment of its founder, the legacy of Silk Road is as central to the story of Bitcoin as ever.

The Beginning

Ulbricht has claimed that when he started working on Silk Road in 2010, it was never his intention to enable the creation of the black market it would become. The recent Penn State University graduate had just earned his master’s in science and was struggling to make an impact with his entrepreneurial efforts. The used-book startup he joined with his friend Donny Palmertree, Good Wagon Books, was going belly-up when he left it to work on Silk Road full-time.

In a court letter during his sentencing, Ulbricht wrote that he built the marketplace because “people should have the right to buy and sell whatever they wanted so long as they weren’t hurting anyone else.” That the website became a hub for drug trafficking was an unintended (and regretful) consequence, he insisted.

“Silk Road was supposed to be about giving people the freedom to make their own choices, to pursue their own happiness, however they individually saw fit. What it turned into was, in part, a convenient way for people to satisfy their drug addictions. I do not and never have advocated the abuse of drugs.”

If he had been more “mature,” the court letter goes on, he would have “done things differently.” In a twisted sort of way, Ulbricht’s ostensible regret and his eventual arrest can be seen as a measure of the site’s success. 

For an anarchic market, Silk Road was fastidiously curated. Ulbricht created escrow accounts for transactions, drugs had product descriptions and pictures like you’d find on other online marketplaces, and sellers and their wares even had review sections. It also had a strict set of rules regulating what could and couldn’t be sold; child porn, weapons and anything that could be used to inflict harm on others were strictly prohibited. 

What started as Ulbricht selling his own homegrown psychedelic mushrooms to kickstart the marketplace swelled to 10,000 accounts in 2012 and, eventually, 1 million at its peak. Before its closure, analysts estimated that it attracted anywhere from $15 million to $45 million annually in black-market business. As the site swelled in popularity, Ulbricht kept a full-time staff and paid $50,000 a month for security.

Silk Road Rising

Silk Road’s fame had escaped the confines of its underground coterie and was creeping into the lens of pop culture’s scandalous gaze when a June 2011 profile of the marketplace by Gawker brought it into the limelight. This was good for business, as account registration surged. But it also meant Silk Road was increasingly on the government’s radar, with Washington, D.C., mainstays like New York Senator Charles Schumer calling for its demise.

A young Ulbricht, showered with success but under mounting stress, was in the hot seat.

“I was mentally taxed and now I felt extremely vulnerable and scared,” he wrote in a 2011 journal entry. 

Ulbricht needed help then more than ever. He employed more staff and started taking cues from a mentor and confidant named Variety Jones (aka “Cimon,” following a pseudonym change). For instance, Jones identified a security vulnerability in the site’s bitcoin wallet.

In late 2011, Ulbricht allegedly told a programming friend that he was the man behind Silk Road. Around the same time, he may have also revealed his involvement to a romantic interest.

When Jones found out that these two people might know Ulbricht’s connection to the site, he encouraged Ulbricht to change Silk Road’s administrator account handle to Dread Pirate Roberts — a pseudonym that would become significant during Ulbricht’s trial.

“You need to change your name from Admin to Dread Pirate Roberts,” Jones told Ulbricht in a January 2012 chat. “Clear your old trail — to be honest, as tight as you play things, you are the weak link from those two prev[ious] contacts.”

The moniker Dread Pirate Roberts comes from a fictional character in “The Princess Bride” whose generation-transcending persona is adopted time and time again by ever-new personalities. The symbolism and function, Jones implied, would be perfect for Ulbricht’s role as Silk Road’s figurehead: It would obscure ownership under the guise of multiple operators. 

“And over the years, a new one would take the name, and the old one would retire … start the legend now,” Jones coaxed in a chat. “DPR by its very nature indicates a rotating command. We’ll play that.” 

Ulbricht changed his admin profile some weeks after the January 2012 conversation. 

The notion that DPR was multiple people became a pillar of Ulbricht’s defense during his trial, since the chain of events that followed could never be definitively tied solely to him. 

Cocaine, Undercover Cops and Bounties

By 2013, the site’s success was reaching critical mass and the person acting as DPR was faced with critical ultimatums.

When a Silk Road administrator, Curtis Clark Green, was arrested for cocaine possession, undercover agents got their hands on the first human link to the site. The head of the task force that arrested Green, Carl Force, took over Green’s account, used the pseudonym “Nob” to speak with DPR via Silk Road’s private chat and used Green as an informant. 

Masquerading as a member of a drug cartel, Nob told DPR that he had mucked up a cocaine sale by accidentally sending it to Green. Nob asked Dread Pirate Roberts if he needed help rectifying the situation with Green. Though DPR was hesitant at first, he eventually took Nob up on the offer, first by asking him to rough Green up so he’d cough up the funds he stole, then by ordering his assassination. Agent Force, still posing as Nob, faked a torture scene in a Salt Lake Marriott to forge Green’s death. The price tag for the job was $80,000 in bitcoin.

Business at Silk Road cracked on as usual, but Dread Pirate Roberts would allegedly resort to assassination bounties five more times during Silk Road’s dwindling lifetime, all of which turned out to be faked. None of the targets were ever assassinated, and it is now believed that Dread Pirate Roberts was set up. 

Ulbricht himself was never charged for the second set of ordered assassinations, and his indictment for ordering Green’s assassination, which was filed in Maryland, was dismissed in July 2018 for prejudice. Despite lingering questions about who was using the DPR handle and when, the prosecution was permitted to use evidence of Green’s staged assassination in Ulbricht’s trial for operating Silk Road, though the court never charged him for it.

On October 2, 2013, FBI agents arrested Ulbricht in the science-fiction section of a San Francisco library. Distracted by two agents who faked a lovers’ quarrel, Ulbricht took his eyes off his work long enough for another agent to grab his laptop. With sleight of hand and the insertion of a USB drive, law enforcement officials now had access to Silk Road’s treasure trove of secrets.

The jig was up. Ulbricht was whisked away to New York for a nearly year-long trial, which ended in the double life sentence plus 40 years that he is currently serving.

Silk Road’s Legacy And The Free Ross Campaign

“The government did not produce a single witness to testify firsthand that Ulbricht authored any of the communications attributed to DPR. It was all digital, created and transmitted on an anonymous, untraceable internet network.” — Joshua Dratel, criminal defense attorney

Ulbricht’s legal defense appealed his case in 2016 on the grounds that prosecutors withheld evidence of malfeasance on behalf of agents involved in the case and that Ulbricht received an unreasonably harsh sentence (one more heavy-handed than what El Chapo received, for instance). A judge denied this appeal in 2017, and a writ of certiorari petitioned to the U.S. Supreme Court was shot down in 2018 as well.

Since her son’s arrest, Lyn Ulbricht has actively crusaded to ease his sentence. The Free Ross campaign she started online has received over 170,000 signatures in favor of his release or a reduced sentence. Lyn Ulbricht and her son’s defenders believe that, more than his receiving a draconian punishment, Ulbricht was a scapegoat, sacrificed on the altar of the U.S. justice system to prove a point.

Ulbricht was framed, they say, by others who had taken on the Dread Pirate Roberts name and were operating the DPR account. 

“Our position, as it has always been, is that Ross is not DPR who is participating in those chats,”  Ulbricht’s legal representation told “Wired” in April 2015.

Even with some proof pointing toward Ulbricht operating the Dread Pirate Roberts handle at some point in time, disputes still loom as to whether or not he was the only person behind the account. Green, for instance, once said on a podcast that there “absolutely” were multiple individuals who had access to the username.

“I was DPR once,” he said. “So if I was, who else was?”

In addition, his defenders also argue that the conditions for Ulbricht’s arrest violated the Fourth Amendment of the U.S. Constitution, that agents tampered with or mishandled evidence on Ulbricht’s laptop following his arrest and that the jury was never given all of the information it needed in order to reach a fair verdict. For example, the defense attempted to call Bitcoin expert Andreas Antonopoulos and computer networking and internet security expert Steven Bellovin as expert witnesses, but they were prevented from testifying.

We’ll likely never know when Ulbricht was and was not at the helm of the Dread Pirate Roberts account. But at the very least, the Dread Pirate Roberts pseudonym functioned exactly as Variety Jones envisioned: After Silk Road went down, plenty of successors rose from its ashes, and its legacy has remained firmly entrenched.

And Ulbricht’s arrest has proven to be a rallying cry. Soon afterward, another Dread Pirate Roberts launched Silk Road 2.0 with the help of two original Silk Road admins, Inigo and Libertas. That site fell prey to law enforcement in 2014, and Silk Road 3.0 stepped into its place until that, too, went offline in 2017. Other similar sites, such as Wall Street Market, AlphaBay, Dream Market and Hansa, would either succumb to law enforcement or shut down operations to avoid the same fate as their predecessors.

Even with its progenitor in jail, the online underground market model that Ulbricht initiated persists. When one goes down, another (and another and another) takes its place, as one would expect in a free market. Lyn Ulbricht told “Bitcoin Magazine” that this free market is precisely what her son envisioned, emboldened by the libertarian philosophy that willed it into existence, and has always been central to the cryptocurrency it leveraged.

“I think Ross’s motivation in creating Silk Road was to provide a truly free market that was private and used bitcoin, as he saw the potential for monetary freedom that bitcoin provided,” she said. “Even the sentencing judge said she knew he created the site for philosophical reasons. She just wasn’t convinced he had given up that philosophy and felt justified in condemning him to die in prison for it.”

The post The Long and Winding Story of Silk Road, Bitcoin’s Earliest Major Application appeared first on Bitcoin Magazine.

Filed Under: Bitcoin Magazine, dark web, darknet, English, Ross Ulbricht, Silk Road

FinCEN Files Remind Us That Bitcoin Is Still Not For Money Laundering

23/09/2020 by Idelto Editor

This article originally appeared in our Down The Rabbit Hole newsletter. If you want our news and analysis straight to your inbox, make sure you subscribe now!

This week, a released cache of thousands of reports from major banks showed that these institutions ignored their own concerns and willingly moved trillions of dollars around the world on behalf of suspected terrorists, criminals and corrupt governments.

Known as the “FinCEN Files” because the banks’ reports were filed with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), this cache was brought to light by a group of international journalists. There were more than 2,100 suspicious activity reports released this way, which referred to more than $2 trillion of transactions occurring from 1999 to 2017, according to The New York Times. 

Lenders that filed such reports and then willfully ignored their own concerns include JPMorgan Chase, Bank of America, HSBC and Deutsche Bank. These groups moved funds for the likes of a Taliban-tied company, groups connected to the North Korean regime and the organizer of a sovereign wealth fund fraud in Malaysia.

There’s definitely a Rabbit Hole to be explored about FinCEN and its laborious journey to regulate cryptocurrency activity. But I think the real entry point from this revelation about the world’s foremost financial institutions is through the misappropriated reputation that Bitcoin has for money laundering. 

A great place to start on the connections between BTC and money laundering is with this Bitcoin Magazine article from 2013. Bitcoin has long held a reputation for facilitating dubious transactions — thanks to its pseudonymity and privacy protections, BTC was the currency of choice for the world’s most prolific darknet market, Silk Road. Silk Road was such a prominent fixture in the Bitcoin economy that Vitalik Buterin covered the project in a two part report for Bitcoin Magazine back in 2012.

But the truth is that while Bitcoin is a pretty solid tool for obscuring financial transactions (as Aaron van Wirdum covered in this exploration of Bitcoin privacy technology from 2018), it’s far less capable of protecting privacy than some other cryptocurrencies out there. And, as the FinCEN Files have underscored, the world’s premier financial institutions are regularly laundering money as well.

So, even though darknet market activity will probably always remain connected to Bitcoin (as we explained last year), this week’s bombshell report is another reminder that Bitcoin’s use as a tool for criminals is just another myth that might apply better to the world’s legacy systems.

The post FinCEN Files Remind Us That Bitcoin Is Still Not For Money Laundering appeared first on Bitcoin Magazine.

Filed Under: Bitcoin Magazine, dark web, English, fincen, Money Laundering

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