Jonathan Levin

US Government Charges Alleged Bitcoin Fog Kingpin With Money Laundering

The U.S. government has charged and arrested a Russian and Swedish citizen Roman Sterlingov with money laundering using a bitcoin mixer. Ostensibly, Sterlingov was the lead administrator in the Bitcoin Fog operation which used a Coinjoin-based mixing tool to blend BTC UTXOs.

Bitcoin Fog could be found on Tor via an onion address, it required mandatory registration, and a minimum deposit of 0.01 BTC to use the platform. However, the registration process was not tied to an email and simply required a username and password.

The U.S. Internal Revenue Service (IRS) has accused Sterlingov of allowing money laundering without tracing any of the payments. Federal prosecutors believe Sterlingov took in around $8 million in BTC for his services, getting around a 2% fee per mix on Bitcoin Fog. Sterlingov is accused of processing 1.2 million BTC, which was worth around $336 million at the time of all the payments.

“Analysis of bitcoin transactions, financial records, Internet service provider records, e-mail records, and additional investigative information, identifies Roman Sterlingov as the principal operator of Bitcoin Fog,” said Devon Beckett, the IRS’s Criminal Investigation special agent. Sterlingov is charged with “Money Transmission without a License,” “Money Laundering,” and “Unlicensed Money Transmission.”

Blockchain Analysis Exposed the Bitcoin Fog Operator in 2011

Wired contributor, Andy Greenberg, spoke with the Chainalysis cofounder Jonathan Levin about the situation. Greenberg’s report details that alleged transactions stemming from Sterlingov in 2011 gave the IRS the clues they needed to catch him. Sterlingov apparently used these transactions to set up Bitcoin Fog’s server.

“This is yet another example of how investigators with the right tools can leverage the transparency of cryptocurrency to follow the flow of illicit funds,” the Chainalysis executive told Greenberg.

What do you think about the alleged Bitcoin Fog operator being charged with money transmission without a license? Let us know what you think about this subject in the comments section below.

Chainalysis Raises $16Mn — Plans to Monitor Multiple Blockchains

The blockchain surveillance company Chainalysis has announced it has raised $16 million USD in a Series A funding round from the firm Benchmark. Chainalysis also reveals it will be stretching its monitoring software efforts towards the bitcoin cash network and hopes by the year-end the platform will cover ten different public blockchains.

Also read: Russians Owe 13% Tax on Their Crypto Incomes

The New Chainalysis Product ‘KYT’ — Know Your Transaction

Chainalysis is a blockchain surveillance company that produces tools for governments and law enforcement agencies to track bitcoin transactions. The firm was created in 2014 by Jan Moller, Jonathan Levin, and Michael Gronager and has been known to help with criminal investigations involving digital currencies. For instance, Chainalysis has helped law enforcement officials during the Mt Gox investigation. Now the company has raised $16 million in capital from Benchmark and the firm is adding Benchmark’s Sarah Tavel to the Chainalysis board of executives.

Additionally, Chainalysis is adding a new product called ‘Chainalysis KYT’ (Know Your Transaction), a service that enables real-time feedback on the “the underlying purpose of transactions.” Moreover, the protocol will feed that feedback into exchanges’ transaction processing engines and alert customers of “risky customers and export suspicious activity reports”.

“We have opened KYT to a small group of early customers, and they have already seen a 20x improvement in the speed of account reviews,” Chainalysis explains during its announcement. “We’re excited to officially open this solution to exchanges and financial institutions everywhere, which represent the fastest growing segment of our business today.”

Bitcoin Cash Monitoring and Ten More Currencies by the End of 2018

Chainalysis also informs the public that the company is introducing multi-currency support going forward that will track other blockchain transactions. Chainalysis details that multi-currency support for blockchain surveillance entails “looking beyond bitcoin.”

“To start, we are launching bitcoin cash as part of ‘Reactor’, our investigation software, for our law enforcement and government customers, and we plan to expand to at least ten cryptocurrencies by the end of the year,” Chainalysis explains.

We think of the different blockchains that power different cryptocurrencies as all part of the same machine. Both ‘Reactor’ and ‘Chainalysis KYT’ will feature all the cryptocurrencies that we support this year.

Blockchain surveillance and cryptocurrency transaction monitoring firms have concerned digital asset proponents for quite some time. These privacy-invasive platforms have spawned the creation of bitcoin transaction mixers and altcoins meant to make blockchain transactions obfuscated. Despite the blowback, Chainalysis understands that the private sector and the nation states will always be willing to pay for their software as long as crime exists.

What do you think about Chainalysis raising $16 million and preparing to monitor the bitcoin cash blockchain? Let us know how you feel about blockchain surveillance companies in the comments below.

Images via Shutterstock, and the Chainalysis blog.

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