Seizure of Bitfinex funds is a reminder that crypto is no good for money launderers
As public understanding of how digital assets work becomes more nuanced along with the mainstreaming of crypto, the language of Bitcoin’s (BTC) “anonymity” gradually becomes a thing of the past. High-profile law enforcement operations such as the one that recently led to the U.S. government seizing some $3.6 billion worth of crypto are particularly instrumental in driving home the idea that assets whose transaction history is recorded on an open, distributed ledger are better described as “pseudonymous,” and that such a design is not particularly favorable for those wishing to get away with stolen funds.
No matter how hard criminals try to obscure the movement of ill-gotten digital money, at some point in the transaction chain they are likely to invoke addresses to which personal details have been tied. Here is how it went down in the Bitfinex case, according to the documents made public by the U.S. government.
A fascinating statement by a special agent assigned to the Internal Revenue Service, Criminal Investigation (IRS-CI) details a process whereby the U.S. federal government’s operatives got a whiff of the couple suspected of laundering the money stolen in the 2016 Bitfinex hack.
The document describes a large-scale operation to conceal the traces of stolen Bitcoin that involved thousands of transactions passing through multiple transit hubs such as darknet marketplaces, self-hosted wallets and centralized cryptocurrency exchanges.
In the first step, the suspects ran the crypto earmarked as being looted in the Bitfinex heist through darknet market AlphaBay. From there, a portion of funds traveled to six accounts on various crypto exchanges that were, as investigators later found, all registered using email accounts
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