Tech

Bitcoin fog case could put crypto tracking to the test


If the prosecution fails to produce clear evidence when Sterlingov’s case unfolds, it may have to rely on more indirect digital connections between Sterlingov and Bitcoin Fog that it describes in its statement of events. collected by the IRS’s criminal investigation division, much of which is based on cryptocurrency tracing techniques. That statement shows a trace of financial transactions from 2011 that allegedly link Sterlingov to payments made to register the domain Bitcoinfog.com, which is not the true Bitcoin dark web. Fog which is a traditional website advertised it.

According to prosecutors, funds to pay for that domain were routed through several accounts and eventually exchanged from Bitcoin for the defunct digital currency Liberty Reserve. But the IRS says the IP addresses, blockchain data and phone numbers associated with the various accounts all connect payments to Sterlingov. A Russian-language document in Sterlingov’s Google Account also describes a method of tampering with payments similar to the one he is accused of using to register that domain.

Sterlingov said that he “can’t remember” whether he created Bitcoinfog.com and pointed out that at the time he was working as a web designer for a Swedish marketing firm. , Capo Marknadskommunikation. Sterlingov said: “That was 11 years ago. “It’s really hard for me to say anything concrete.”

Even if the government maybe proves that Sterlingov created a website to promote Bitcoinfog.com in 2011, however, Ekeland argues that it was based on faulty IP address connections caused by Stertlingov’s use of VPN — Ekeland points out that That’s very different from running Bitcoin Fog dark-web service a decade later, it’s still online and the proceeds are from money laundering criminals.

To show Sterlingov’s deeper connection to Bitcoin Fog beyond domain registration, the IRS said it used blockchain analysis to track Bitcoin payments Sterlingov allegedly made such as “transactions.” trial translation” with the service in 2011 before it went public. The investigators also said that Sterlingov continued to receive revenue from Bitcoin Fog through 2019, also based on their observations of crypto payments recorded on the Bitcoin blockchain.

Ekeland countered that the defense had not received any details of that blockchain analysis and pointed out that it was dropped from the most recent alternative indictment against Sterlingov, filed last week. That means, he argues, that the government has grounded the core of the case on a relatively new, unproven form of forensics — one that he said led them to a suspect. mistake. “Has it been peer-reviewed? No,” Ekeland said of blockchain analytics. “Is it generally accepted in the scientific community? No. Does it have a known error rate? No, it cannot be verified. They can say things that make absolutely no sense, and people have to believe it. “

Ekeland said that the documents discovered in the case show that the prosecution’s cryptocurrency tracing was carried out using tools sold by Chainalysis, a New York-based blockchain analytics startup. , along with consulting help from Excygent, a government contractor specializing in crypto and cybercrime investigations, which Chainalysis acquired in 2021.

Ekeland argued that Chainalysis, which was valued at $8.6 billion in a recent investment round and is often used in high-profile cybercrime law enforcement investigations, has a conflict of interest in the case, due to financial dependence on US government contracts and the flow of former government investigators. who worked for Chainalysis. “This is a story of people profiting and advancing their careers, throwing people in prison to promote their blockchain analytics tool, which is a science that can’t stand any kind of thing,” Ekeland said. any close supervision. He added that, based on the evidence provided in Sterlingov’s case, he believes “Chainalysis is the Theranos of blockchain analysis.”



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