The US invested so much effort into this because they were worried that their own agents were involved with the theft. This was all part of their effort to clean up the massive corruption post-Silk Road seizure.
It does sound like the history of corruption from 2013 means they have to stay alert to this problem.
And it also sounds like the revolving door of government has allowed a lot of the former investigators to get high paying gigs at crypto scam outfits. Not a good look.
Overall, it seems like the government dealt with the corruption adequately, however. It is not reasonable to assume that any institution will be free of bad actors. The question is whether those actors are punished or not.
I have become tired of the overly cynical and hostile rhetoric directed at law enforcement, especially just lazy stuff. But this thread was thorough and fact-based.
So, one agent was caught and convicted of theft, on an unrelated matter, and this is evidence of corruption? Wouldn't that, in fact, be evidence of a system that is successfully punishing corruption?
And since the transaction history is traceable, you cannot posit mysterious other transactions that are unaccounted for. Those would be quickly revealed.
The statute of limitation for wire fraud is 5 years. How did he get charged under that statute when he stole funds from Silk Road in 2012? Did they charge him for converting BCH into BTC in 2017?
I tried to look up the case but couldn't find anything that shed a light on that.
> The statute of limitation for wire fraud is 5 years. How did he get charged under that statute when he stole funds from Silk Road in 2012?
This is a very simplistic view and this mistake is made a lot. There are several reasons why the statute of limitations could either be longer than 5 years or not yet expired even though it is 5 years:
- Tolling. This is when the suspect exits your jurisdiction, preventing you from apprehending them. If the statute of limitations really is 5 years, and you leave the country 4 years after the act; even if you stay abroad for a year, or 5 years, or 20 years, the clock only resumes when you return. You can still be charged 24 years after committing the offense.
- Furtherance. Put simply, if you continue to engage in the activity, the statute of limitations is reset. For example, this article describes his repeated moving of the assets after the initial theft in order to avoid detection.
- Special Circumstances. In this case, there are exceptions that mean that the statute of limitations is not actually 5 years.
It's not clear which of these apply. I would definitely bet on option #2. If he spent any time outside of the country, also apply option #1. If any of the special circumstances defined in the law apply, also apply option #3.
It seemed to me that option #1 only applied if you were a fugitive and your whereabouts were unknown, not when you simply leave the state or country.
As to furtherance, I wonder how precise the definition of it is; is using proceeds of a crime, furtherance of a crime? Is obfuscating a crime, furtherance of a crime?
In regards to whether simply leaving the jurisdiction is grounds for tolling the statute of limitations, see 18 USC 3290, which is a one-sentence law reading:
No statute of limitations shall extend to any person fleeing from justice
It can be reasonably argued that leaving the country after having committed the offense is fleeing from justice. I'm not aware of any supreme court ruling on the matter though, and I am not a lawyer.
Is the limitation in relation to being penalised for a crime, or somebody being wanted for a crime?
If there was a police report about a crime, if the police were unable to determine who committed the crime but at a later date could do so beyond reasonable doubt?
What if the perpetrator evades police for 5 years but remains in-state?
What’s your location also, that would be relevant to the laws your referring to.
The clock starts counting upon the completion of the crime. There are exceptions as I explained previously; for example, if your crime involves conspiracy with another person, then all future communications with or actions in consort with that person in furtherance of your crime resets the clock. To give an example, if you collude with someone in accounting to defraud your company and have them sign false financial statements to cover it up, the clock is reset upon each signature they make or each time you ask.
Some district courts have held that the statute of limitations can be tolled while the suspect is actively evading law enforcement even if they remain within their jurisdiction; some haven't.
I'm in England, but I'm talking about United States Federal Law.
Dang, so if this person just left the BTC in a cold wallet for 5 years, did no more crimes, and stayed put, he could have gotten away free and clear? Or does #3 essentially mean they can just extend the limit forever if they can come up with a plausible sounding enough reason?
No, option #3 only considers the law as written. For example, the statute of limitations for wire fraud can be 10 years if the victim is a financial institution and some other conditions are met (18 USC 1343, 18 USC 3293):
Initially it was worth "only" 600K, I think he might've gotten away with it if he cashed out at that point.
I wonder if the clock resets if he converted it to real money after those five years, I mean selling stolen goods is a separate crime from stealing, isn't it?
I think the best thing he could've done is to move to a country without an extradition policy with the US. Then of course comes the challenge of cashing out BTC that's been marked as stolen, but I'm sure there's ways and means. But for 3.2 billion, someone can live like a king for the rest of their life. It's just that because it's marked, they won't ever be able to go home or go where they want.
It sounds like one of those "will you press the button" catch-22's.
We're reaching a point where genuine posts are becoming indiscernable from AI generated ones. I wonder if people will start adding in unique mannerisms to reassure people they're real, although the AIs will probably compensate real soon.
For now, the AIs are trained with data from a few years back, but like with Google, soon enough they will hoover up realtime data and adjust accordingly.
For funsies, here's a comment on this article from ChatGPT:
> (prompt)
> Write me a Hacker News comment about the arrest of James Zhong, who stole 50.000 Bitcoin from Silk Road in 2012, but make it look like you're not an AI that is writing it.
>
> (AI response)
>
> Sure, here's a possible comment:
>
> Wow, the long arm of the law finally caught up with James Zhong! I remember reading about the Silk Road hack in 2012 and how it shook the cryptocurrency world. 50,000 BTC was a huge amount back then, and it's worth even more now. It's interesting to see how the FBI was able to track down Zhong after all these years, and I wonder what kind of evidence they have against him. Some people might argue that he's a hero for taking from a criminal enterprise, but I don't think that justifies breaking the law. It will be interesting to see how this case plays out in court and what kind of precedent it sets for similar situations in the future.
Presumably if he had then moved the keys, he's just committed a crime again, so we're back in business. If he'd sat on the keys forever, he would never be prosecuted.
Impossible to know. Unless the feds deny there is an investigation, it's always possible that an investigation is ongoing. It's possible to extend the statute of limitations with sealed indictment under what is called a John Doe defendant. This loophole was employed in the DB Cooper case.
"Tolling" is a controversial theory from 17th century English common law when rebels fled to France or the colonies.
It will be very much tested this year when Trump is prosecuted under the theory that being in Washington DC counts as "out of the country" or "outside the jurisdiction of the city of New York" and therefore the statute of limitations has not run out.
> So, Mr. Zhong, the statute of limitations for the crime you're charged with in the information is five years. Accordingly, you could argue that the time to prosecute you for this crime has passed, and that the crime is now time barred; you can no longer be prosecuted. Have you discussed this with Mr. Bachner?
> THE DEFENDANT: Yes, your Honor.
> THE COURT: And is it true that you agree to waive any statute of limitations defense you might have with respect to this charge in the information?
> THE DEFENDANT: Yes, your Honor.
For some reason this bug was not as sophisticated as I thought it was:
> THE DEFENDANT: ...In September of 2012, after using the site just once or twice, I decided I no longer wanted to buy anything else from Silk Road and decided to withdraw my bitcoin from the website. While doing so, I accidentally double-clicked the withdraw button and was shocked to discover that it resulted in allowing me to withdraw double the amount of bitcoin I had deposited
> After Jimmy took the Bitcoin from Silk Road, Ross Ulbricht contacted Jimmy over the Silk Road messaging service and asked him to explain how he accessed the Bitcoin. After Jimmy told him what he did, Ulbricht never asked Jimmy to return the coins. Rather, he thanked Jimmy for his candor and sent him, unsolicited, additional Bitcoin. Silk Road’s response to Jimmy’s conduct is hardly the response of a victim.
> The Government notes that Jimmy waited around four months from the date of the search to turn over control of the Bitcoin to the Government
> Although the Government had seized the physical device needed to control most of the Bitcoin, the Government had no way to use that device to control the Bitcoin without Mr. Zhong’s cooperation. Jimmy gave the Government, with no promise of anything in return, the keys and tools needed to take control of billions of dollars’ worth of Bitcoin—control that the Government would not have been able to gain without Jimmy’s cooperation
> He recalled converting some of his Bitcoin into $700,000 in cash. He stated he did this so that he would have a “case full of money like in the movies.” He hoped the visual appeal of the cash would impress a female into having sexual relations with him. He stated his plan did not work.
Government was fairer than usual in their sentencing submission, only asked for 24 months. Honestly this whole story just makes me kind of sad. Also makes me wonder why he even agreed to give up the coins.
Its silly he lacks this much awareness, it reads like he just wanted to be rid of the burden because he can’t figure anything social out
People don’t even need actual bitcoin, they just leave their phone wallet open on a watch address while they “go to the bathroom” on a date, and let their nosy date take the bait and watch the tune change in real time
Money still overrides other preferences and exacerbates poor character development across genders, it just means his way was so bad…. Carrying around suitcases wow.
In my experience, someone committing crimes like this has a fundamental issue with their emotional self regulatory ability. Money enables coping mechanisms (well, clearly just sometimes like in this case!) that otherwise wouldn’t be available. It is also a general motivator, as you note, for folks to do all sorts of things for someone besides general emotional coping type stuff. Like get a house, or whatever.
Chances are his social dysfunction really stems from something deep he’s refusing to look at and acknowledge; and it’s feeding all these behaviors maladaptively. He probably had one particular person he wanted the validation he saw as coming from sex with, and that’s why the suitcase.
Especially since, quite frankly, if he just wanted to get laid and had cash, it’s not like it would take that much looking to find someone to help him with that and it wouldn’t involve more than a small handful of bills. If he could get his act somewhat together, anyway.
Good point! The baggage is never just what’s in the suitcase (or just the cash, as it were), and (to be serious) glad the other person saw that too. The unimaginable degree of shit that they would be accepting if they took it would be mind boggling.
My guess is that because the other party is not the type of person who would have sex for even a suitcase of cash with them, is why the perp wanted them so much they tried a suitcase of cash.
> THE COURT: All right. I find that Mr. Zhong has knowingly and voluntarily waived both venue as well as any argument here that the crime charged in the information is time barred.
How does this even work?
So can the defendant "knowingly and voluntarily" give up their right to defend via Constitution?
I'm not a lawyer, but I've known people go through the (similar, in the UK), mill of prosecution and read/watched enough about some cases to get a sense of how it might play out behind the scenes.
Let's step back, and see if you still think this is "give up your right! Or else!"
The prosecutors are 50/50 on getting a conviction. If they win, they're sure they're going to see the defendant go to prison for, say, 10 years. If they lose, the defendant walks, and thanks to the fifth amendment (almost everywhere in the World has double jeopardy protection), unless substantial new evidence emerges, they'll never get to prosecute this individual again. They're pretty sure they have everything they'll ever find, so this is it.
The defendant and his legal team are 50/50 on getting an acquittal. If they win, it's over. If they don't, it's 10 years in prison which is pretty awful.
The trial is going to be expensive for both sides. The prosecution will work to get the odds in their favour, the defendant's legal team will be trying to figure out how to get it in their favour, and so on.
This process is expensive, and eventually the taxpayer is going to pay. Even if the proceeds from the crime have been recovered and sold, the money going into public funds is going to come right back out again to prosecute, and if the defendant has nothing and can't afford their own legal bills, the taxpayer is paying both sides.
Everybody - and I mean everybody - knows the defendant did what he did.
There are interviews that are barely credible, paper trails of assets moving, lots of evidence of obfuscation and trying to cover tracks, but there's confusion in the story about intent to commit a crime.
The judge might decide to throw it out on statute of limitations, a jury might look at the psych reports and think the kid seems nice and naive and not the criminal type, so let's believe his story.
It's a bit of a mess.
Neither side really fancies were this going because there is concern you're setting off a train of case law, too - as a prosecutor do you really want to test statute of limitations if the person wasn't "fleeing from justice", but just enjoying some money he came into? That defence lawyer really looks like he fancies his day in the Supreme Court...
Meanwhile, the clock - and publicly funded meter - is ticking.
Prosecutor approaches defence. "Plead guilty, we wrap this up, your guy gets 5 years instead of 10. Parole eligible at 3 years".
Defence retorts "2 years, suspended".
Prosecutor comes back "2 years, no suspension, no parole, but time served taken into account".
"Deal". The judge gets a call. He decides to make sure there is no risk of an appeal to make clear to the defendant in court that there are questions about statute of limitations that he would need to waive. Defendant agrees to waive his rights. They move to sentencing, the prosecutor asks for 24 months, the World moves on.
Everyone wins, even though the defendant goes to prison for a while. He's got 20% of the likely maximum penalty on an even money shot, which any gambler will tell you is superb "value".
The prosecutor has lost out in terms of seeing time served, but has got a conviction and saved the taxpayer many, many dollars.
The defendant didn't lose their rights. They looked at a 50/50 shot and decided they'd prefer 2 years guaranteed and get on with their life rather than take a 50% chance of 10 years.
As an unaffiliated third party, it’s actually quite the example of game theory in action. Everyone has something to risk and trying to figure out the dance of who gives up what is really interesting.
Until you realize these are peoples actual lives… then it’s also sad.
I think the defense leaned on the part where the owner of the service basically allowed him to keep it, plus cooperation; if the judge rules him innocent (e.g. while he exploited a bug, the then-owner did not press charges and rewarded him), he might get the BTC back, but this time cleared of any crimes. Meaning he can cash in and walk free.
Well, relatively free, his face and name are known and if he is exonerated, everyone will know he's a multi-billionaire and the life of himself and others are in danger.
He gave up the coins because his lawyer probably advised him the statute of limitations would not apply here or hold up. If it did apply there would be no case at all, full stop. So a plea is better than facing up to 20 years.
> But by the time he was in college, he converted some of his digital wealth into $700,000 in cash. He wanted to have a “case full of money like in the movies,” Mr. Zhong said, according to a psychological assessment filed with the court. “He hoped the visual appeal of the cash would impress a female into having sexual relations with him. He stated his plan did not work.”
Zhong was caught because he made basic operational security errors, like address reuse (which is how he was caught by linking fraud wallet to exchange wallet) , static IP, using a KYC exchange in 2017 to convert BCH into BTC, etc. Not because Bitcoin was cracked. After being caught, Zhong voluntarily relinquished his passwords to encrypted wallets and other bitcoin, not that the crypto was cracked.
I wonder how the feds bypassed the statute of limitations on this. He was not identified until almost a decade after the theft. I am guessing his attempts at laundering the money and spending, reset the clock.
Very broadly speaking if you're hiding and law enforcement is actively looking for you the statute of limitations pauses, because the delay is morally your fault. (And actively looking has a generous definition) That could be what happened here.
that's where case law comes in, probably there's some test for it made up by a few judges (like was there an active warrant, or named as person of interest in an active case, etc..)
I assume people involved in this sort of activity would convert to Monero first (can be done without KYC in a 100 different places). Then they would go to localmonero or a site like it and select cash in the mail. They would round to the nearest XMR at a time when transacting on localmonero so that even if the exchangers they used were compromised the government wouldn't be able to link them to the initial BTC->XMR swap based on transaction amounts.
Not at this scale. You can do many transactions in the way that you describe and perhaps withdraw a million dollars, but you can't launder a billion dollars this way.
There is a reputation system on basically all p2p exchange sites, they wouldn't be able to scam for long.
> running into a sting
This was the basis of Operation Dark Gold. They had a ton of other evidence against the people they rounded up, I think it just helped them find targets. Receiving cash in the mail is not illegal.
Many ways. Dark valley exchanges. Flying to Dubai and exchanging any amount with draft fleeing Russians. Sending to a Lightning Network wallet, doing a few rounds within the LN and then depositing to an exchange.
by simply using a third wallet that does not link the two? HIs mistake was a rookie move that could have been avoided but he got lazy. Lazy criminals make law enforcement's job easier.
I don’t understand what the third wallet does. If the first wallet is tainted, anybody can just look to see what destination wallets it sends to and follow the trail. Adding an extra wallet doesn’t help.
This is just part of the Bitcoin sales process: any time a case gets attention showing that a common marketing claim is wrong, the sales guys come up with a reason to say it was the victim’s fault rather than a weakness of the system they’re trying to get you to buy into.
You can, but this is the kind of thing which is very easy to get wrong in ways which are significant legal risks on their own.
For example, if you were some random cryptobro buying personal quantities of drugs in 2015 there’s some risk but the FBI probably isn’t going to spend time on something that small. If you do anything which reveals funds going to or from a tumbler, however, the risk isn’t just KYC but also questions like who else used that tumbler - if you were participating at the same time the North Koreans or a big ransomware ring were laundering something, that traffic might be a lot more likely to get analyzed and in the worst case scenario some agents show up trying to get you to convince them that you were unwitting small fry and not hiding more. Lying to them is a federal crime, too, so even if you nothing other than tumble coins for ideological reasons you’d want to be very careful about what you say – and think about how hard it could be to prove you didn’t know the other parties in a transaction.
>Lying to them is a federal crime, too, so even if you nothing other than tumble coins for ideological reasons you’d want to be very careful about what you say – and think about how hard it could be to prove you didn’t know the other parties in a transaction.
This is true. However, I'd present a few caveats:
1. Even though it's a felony to lie to Federal (and some state/local) law enforcement in the US, you can just not speak to them. In fact, you should mostly not talk to the police under any circumstances. There are many reasons for this. Too many for me to list here. However, this attorney and a former police officer[0] (48 minute video, but well worth it. Share it with your friends and family too!) provide all those reasons.
2. Law enforcement aren't superhuman. They're just as dumb (or smart, but the really smart ones end up in corner offices rather than police stations like police and more common criminals) as the next guy. Their big advantage, especially in a circumstance like this, is that they only have to get it right (i.e., find some evidence) once. The alleged perpetrator of a crime needs to get it right (in covering their tracks, destroying evidence, etc.) every single time to make sure they aren't identified and caught.
So, unless you're prepared to cover your tracks (in this case, it was bitcoin transactions) over and over forever, you run the risk of being caught -- eventually.
I'll say it again, because it's an important point: If you're in the US (not just a citizen, anyone present within its borders), DON'T TALK TO THE POLICE!
I'm sure things are different elsewhere (perhaps someone could expound on that?), but in the US, just STFU.
> So, unless you're prepared to cover your tracks (in this case, it was bitcoin transactions) over and over forever, you run the risk of being caught -- eventually.
This is really the main thing I was thinking about: it’s been bizarre how the salespeople kept going on about bitcoin being anonymous when it’s more like “if you do everything perfectly, you probably won’t be tracked. As far as we know now.”, which is just incredibly fragile.
You're referring to the risk of getting chased down for the "bad deeds" of others after funds are co-mingled. You're not explaining that it's prohibitively risky or not possible.
Further, I'm only aware of tumbling blacklisting [0], where the exchange gets blacklisted for co-mingling known dirty funds. AFAIK, there are still sizable tumbling vectors.
My point was simply that your options with Bitcoin for converting it into real currency or goods are either easily tracked (mainstream exchange following KYC laws) or push you into riskier activities. As with most things, the odds of getting caught aren’t certain but one somewhat unique risk to most cryptocurrencies is that you have to estimate the risk of retroactive punishment since the ledger is irrevocably public.
That’s already stressful and expensive but consider also that you’re probably only having that conversation if they already have evidence for at least one crime (disclosure and/or taxes). That is likely going to be grounds for a search warrant to examine everything else, and even if that’s ultimately fruitless it’d be an ordeal and could lead to professional consequences as well as things like losing your devices to a forensic lab.
I don't like that. Opsec burden on users is the fault if the protocol. I see this thinking being pervasive in many areas. If it was monero address reuse is not a concern or using kyc exchange logs if the other currency was zcash for example.
Bitcoin is not a cipher it's the whole system so it is valid to say a weakness in bitcoin was used to find the person.
> I wonder how the feds bypassed the statute of limitations on this.
I don’t think they did; if the BCH transaction was in 2017 was the subject of fraud, it was within the statute of limitations when he was publicly charged.
> I am guessing his attempts at laundering the money and spending, reset the clock.
They didn’t “reset the clock” on the fraud involved in obtaining the bitcoin initially, but they were likely generally, on their own, fraudulent transactions.
According to info from another comment, he waved the statute of limitations as part of a plea deal. Not really sure how a plea deal was on the table after the statute of limitations, but there you are.
In some of the supplementary documentation for this press release, you can see the government's case for seizing Zhang's assets on the grounds that they are traceable to a different convicted criminal (Ulbricht, who is the victim of Zhang's fraud), whose assets were already forfeited due to Ulbricht's conviction.
I'm curious though, if Zhang had not plead guilty and the government had not succeeded in getting a wire fraud conviction for Zhang, would their argument that the assets are forfeitable under Ulbricht's conviction have failed also? In other words, was it necessary to convict Zhang to finish seizing Ulbricht's assets, or could they have won a case for seizure without a conviction for Zhang?
> federal agents surprised Mr. Zhong with a search warrant and found the digital keys to his crypto fortune hidden in a basement floor safe and a popcorn tin in the bathroom
"Open" is a heavily overloaded term. One of the main premises of Bitcoin is tamperproofness and permissionless participation.
That in itself does not equate to lack of anonymity. Just have a look at Zcash[0] or Monero[1].
In general, the idea that openness and anonymity are in conflict with each other has not been true for at least 40 years. There's entire field of mathematics dedicated to solving this problem known as secure multi-party computation.
I haven't dunked on bitcoin once. nor have i ever mentioned "permissionless"
Bitcoin is an open ledger. It was never designed for hiding transactions. I'm also not saying thats a bad thing. it just is what it is, and yes I hold some btc (albeit not much, just enough to experience it mostly)
and in practice maintaining that theoretical anonymity is hard. if you use a distinct amount in a transaction, it'll be visible. if there's a low volume your transaction can be correlated with a high probability, etc.
I put it back to the inherent conflict of interest in such a weak fiat currency: the people who hold it must convince you to buy in to see any value from otherwise valueless tokens. Over the years you could watch the Bitcoin sales crew trying tons of marketing pitches trying to find which sold the best – accuracy didn’t matter as long as prospective buyers found it appealing.
it was the early use the in the DNMs. After all why would they be using it if if could be traced? Of course there was ignorance at some of the opsec and other methods those sellers were using.
In general maybe, but if you were selling something online and received bitcoin on a wallet not associated with your irl identity you can be anonymous, its just not practical because you need to de-anonymize to get that into actual cash unless you really know what you are doing.
Only if you and everyone you ever deal with have perfect security. As soon as one person’s identity is leaked, that opens the possibility of a real-world ID being linked to a wallet.
This story from about a year ago also showed how that worked with investigators tracing it link by link:
Future proof security. I think that people discount that aspect of it. If your identity is cracked at any point in the future, perhaps using methods yet to be invented, all your transactions will still be there on the blockchain. I once heard someone refer to the blockchain as prosecution futures, and that is about right.
Exactly - and that’s especially true if laws or other things change. For example, suppose that you made a donation to the political party which lost a key election to an authoritarian – are you sleeping easy at night wondering whether they have a data mining team?
In your hypothetical scenario, I think I would sleep easier having tried to stop it, then to be in the same world but having done nothing to stop it.
There's no real alternative. You rely on the secrets technology we currently have, knowing it might not be future-proof for your entire lifetime, or you don't use secrets technology at all (and I guess live in fear of all possible futures?)
The chance of somebody storing my WireGuard traffic from a local public hotspot to be able to hopefully decode it at some point in the future is far less than someone sniffing dns and http traffic I send from the same hotspot today.
The value of breaking my communication now compared with in 10 years time is far higher too. My bank will have destroyed the records of my dealings in a decades time for example.
Bitcoin’s ledger is specifically designed to be kept forever though. You don’t need to target me today in the how if future payoff
I get the point you’re trying to convey but - at least in the US - you’re legally required to make donations to political candidates publicly anyway, so this isn’t really a regression over the status quo.
That's why you make your anonymous donation to the "Friends of John Smith" organisation, who is completely unaffiliated with John Smith and is merely interested in seeing him elected to office
Or using a business which is required to report transactions, using a site which gets hacked, etc. I don’t think people sufficiently weight the risk of having a ledger which can’t be redacted – for example, I’d imagine there were a lot of people in Weimar Germany who did not think twice about donating to a synagogue or other organization which you would not want have wanted linked to your bank account a decade later.
Maybe you own a car. In 10 years time a green authoritarian communist group starts to suspect anybody who owned a car, you are sent to a re-education facility.
Maybe you are environmentally conscious and bought solar panels. In ten years time an anti environmental fascist group comes to power. You are disappeared.
You make some negative comments about AI at a dinner party. The host has an Alexa home automation system. In ten years time when government is run by AI. You are assigned to sewer cleaning duty, a tragic accident happens.
Summarizing: It's not a really strong argument.
However, if you are doing things that can get you arrested today; That's another story, then you should be paranoid and not use bitcoin. Maybe Monero instead? Although, that's not watertight either.
If you trade in and out for cash, in person with a counterparty, from a self-hosted wallet that you never use to send or receive from any other wallet that's connected to an exchange... then yes. The use case for this is mainly moving money over borders.
It actually is exactly like Hawala, and I've traded BTC in and out with networks that had roughly the same human topography. That was the original killer app or crypto.
FWIW, we Jews (speaking for my family) mostly think the Rothschilds were pretty smart for working out the same type of system by placing a brother in each European capital and banking to kings, keeping a ledger instead of moving physical gold whenever possible. It seems obvious now, but it was "moving fast and breaking things" in the 18th Century.
Are Bitcoin ATM's still a thing? There used to be one in a coffee shop near where I lived. If I deposited cash and wore a facemask and sunglasses, how would anyone ever know who did the transaction?
A couple months ago, I was incredulous when I noticed about a half dozen of them on google maps within a mile radius of where I am in San Jose. I haven't gone looking for them physically, though.
in reality, no, they don't know who I am. Back when LocalBitcoins.com facilitated face to face trades for cash around the world, you just had to have a high rating from previous transactions. Now... how safe do you feel showing up to meet an anonymous guy in a bar with thousands of dollars in Benjamins? That's the downside of being anonymous. /edit: The downside of operating completely outside the system.
/edit 2: I should also clarify that I never cashed out my casino's BTC in this manner. That obviously wouldn't make sense because anything that touched a casino wallet would be traceable to that nexus. I only used it to bring extra spending cash and rent money to countries where it was hard or expensive to transfer USD through banks.
... lol. Going to a site to exchange bitcoin for cold cash seems like the worst idea ever if you want to stay anonomyous. Did everyone just forget about snowden?
Let's game this out. Bob and Alice are the first parties.
You trade in cash, in person, probably in a public place. Say that Alice then gets in trouble for the drug dealing they also do (or maybe the government just pings her for not doing KYC and being licensed to do financial transactions), it could be years later. The authorities seize Alice's computers and subpoena "localbitcoins", or the whatsapp/telegram/signal chat that you had to organise the meetup. They might even have a list of addresses that Alice used for transactions at this point. Alice may or may not have had good OpSec, Bob doesn't know.
From that there a myrriad options to identify Bob and Bob's addresses.
In your example you don't use an exchange, but that's not the only method of identifying Bob. Mass survelliance and metadata gathering noticed 100 phones within the location and timeframe Bob and Alice were supposed to meet. Bob had to take a phone to do the actual transfer of bitcoin (or any altcoin), so just leaving it at home wouldn't work. They also know the amount Alice transferred to Bob and the rough timeframe that it was completed and put into the ledger. Bob was also seen drawing out roughly the right amount from the ATM an hour before the meeting. Of the 100 phones, most haven't drawn out that much money recently.
So they can correlate a set of phones with a set of addresses. Even if Bob is not completely unmasked at this point. He has the money in but has to get the money out as well. Bob wanted as you say, to move money across the border. In order to do that Bob must cross the border[0] and meet with Charlie to do the reverse of the transfer. Only a handful of those 100 phones crossed borders shortly after meeting with Alice.
As soon as the money in that address moves again the cross reference with the locations of the tagged phones and discover that they know Charlie because he's done a KYC with an exchange and installed their app (even if he doesn't use that address for the transaction). They ask Charlie some pointed questions about whether he is following KYC procedures in his financial dealing and he caves and gives up the chat logs confirming your meeting, or maybe they just install NSO spyware on his phone and watch to find all the other people Charlie is dealing with.
So...
In a perfectly isolated one off instance maybe that's pseudonymous. In any real world transaction it's extremely unlikely that a state can't use it's resources to unmask the participants. In a one shot, the rules might be one way, but in multi-shot there are always factors that will serve to unmask the participants, and in reality you have to do those transactions over and over until you slip up and just combine them with a KYC exchange account and it doesn't even require that level of effort on the part of the state. OpSec is hard, as they say.
[0]: there is an alternative where only the bitcoin transaction crosses the border in return for something of value, either physical or digital, both have alternative paths that can be tracked in similar ways.
Since the ledger is public, it can be analyzed for patterns from the individual transactions. The more transactions there are involving a certain party, the more likely an outside observer will be able to piece together identities for that party's overall network. KYC exchanges accelerate that process.
Crypto projects like Monero (XMR) do not have this flaw, as deducing the identities of parties from the public ledger is computationally prohibitive.
Going back to Bitcoin is unnecessary but possible. You go from Monero to cash, wire transfer, or gift cards through a variety of unlicensed conversion services that advertise themselves all over the Internet.
Then you end up like the guy asking for advice on how to sue his banks for freezing the accounts that he'd been using to run his Monero to UKP gateway.
> but possible. You go from Monero to cash, wire transfer, or gift cards through a variety of unlicensed conversion services that advertise themselves all over the Internet.
Those are probably run by the FBI. It seems like a no brained for the government to try to run such services given the wealth of information they would provide.
Having unexplained assets is not a crime and won't be at least in the US because of the constitution, worst case they could be subject to civil forfeiture. Assuming you did everything else right (full disk encryption, Tor on public wifi/LTE router that you alternate routinely, not using Google, etc) the anonymity of Monero means the government would have a very difficult time tying whatever you bought with the Monero to your actual criminal activity. Of course if you are involved in meatspace crime like drugs then maybe if you use these services they put you under surveillance and eventually find you with drugs in the trunk of your car.
Parallel construction: if you do enough crime-adjacent things, the likelihood that you are also engaged in crime makes you interesting to law enforcement.
Breonna Taylor (2020) - Louisville, Kentucky: Police officers entered the wrong apartment using a no-knock warrant, which led to the fatal shooting of Breonna Taylor, an emergency medical technician.
Eurie Stamps Sr. (2011) - Framingham, Massachusetts: Police raided the wrong apartment, and during the operation, an officer's gun "accidentally discharged," killing Eurie Stamps Sr., a 68-year-old grandfather.
As many have mentioned above, civil forfeiture cases for carrying cash are rare, but devastating to people who are originally from countries/cultures that don't trust banks or police.
Heh, it's a literal meaning of crime adjacent (presuming that the person in the actual target apartment was actually guilty).
I suspect anyone that was an early adopter of crypto is somewhat considered crime adjacent because so much of the early usage was silk road.
For a while after MtGox was hacked I used BTC-e (yes, I lost money in MtGox). It was later discovered(alleged?) that the operators of BTC-e were involved in laundering money for the MtGox hack[0]. I guess my very presence in that case would be considered crime adjacent.
I think pocketing any unlockable crypto-wallets you found along the way would cross the line. You could stick them into civil forfeiture and use the resulting cash to upgrade your department-owned car though.
This scheme is so obvious that authorities are monitoring such trades and people have been convicted for money laundering by self-trading NFTs this way.
As always, you can definitely get away with this for smaller amounts, but if you go big and/or repeat it for a long time, this has all the potential to come back to you.
I think you are projecting your beliefs onto them. Mixers, privacy chains, and ZK privacy schemes have all been implemented because everyone in crypto acknowledges the lack of privacy.
You are confusing the enthusiasts with the people who understand crypto. Both groups existed, but the enthusiasts group made many claims that anyone who had even minimal understanding didn't believe.
Satoshi (and many other OG members of bitcointalk) knew, and tried to improve the protocol. BTC was not set in stone at the beginning. It's just at some point Satoshi disappeared, and moonfags[1] who controlled the capital (miners and exchanges) weren't interested in any technical improvements that may make regulators more angry, causing the end of most innovation in the cryptocurrency space.
[1]Sorry for the very colloquial term, I don't know a better one. I mean people who care about cryptocurrencies only as a speculative "investment".
Bitcoin chose a certain set of tradeoffs, and other coins choose differently. It has its advantages. There's no need to project such negativity onto other projects for making different design choices.
Just say crypto bros. We all know someone who treats crypto like it's CrossFit. We'll get what you mean. Even a miner and exchanger is a crypto bro, even if they don't want to admit it. They're in it for the money.
The idea of using Bitcoin or Ethereum to pay for anything always seemed insane to me. I don't want my info about payments I've made to be public, espcially not in a form where, by design, it will never disappear!
I mean bank and CC transactions are remembered, but due to them being privacy-sensitive information, this is tightly secured and (depending on where you are and probably a load of other factors), deleted after a mandatory retaining period.
> And the government interprets sanctions law extraterritorially so you're not safe in other countries either.
It does not; these sanctions only apply to US Persons. Secondary sanctions mean that the Treasury can additional designate non US-Persons for breaches of the primary sanctions, but that is a heavy-handed tool and unlikely to happen to people who merely use Tornado Cash; regardless, no law was broken by such a person.
It is trivial for the government to say that you directly or indirectly used some service operated by American company and therefore you are subject to American jurisdiction. Yes it’s unlikely to happen to any small time Tornado Cash user.
The sanctions are being challenged in court. A federal agency prohibiting use of what is nothing but software is totally unconstitutional, and amounts to a total abrogation of internet freedom, done without any public process like legislation.
It also amounts to a general criminalization of financial privacy.
However, actually running the code to facilitate North Korean hackers launder money and personally profiting off of it? That's not covered by the first amendment, and I sincerely urge you to not try to find that out in the hard way.
> However, actually running the code to facilitate North Korean hackers launder money and personally profiting off of it?
Who is "running" the code?
The US government, to this date, has not made an argument that the developers of Tornado Cash, who have deployed the code to the Network, have committed a crime; at least one of them seems to be living in the US.
Nor has the government made an argument that operators of Ethereum nodes are committing a crime; they might also be considered to be running the code.
What the government has done is, through sanctions, instituted restrictions on Americans interacting financially with the smart contract. This has nothing to do with "running code"; this is operating under the assumption that the Tornado Cash smart contracts are an entity that is party to financial transactions.
Whether they have the power to sanctions non-entities like a smart contract is what the suit intends to find out.
Using any encryption protocol increases the anonymity set of the protocol and therefore will inadvertently help criminals who are trying to stay anonymous. That is not an argument for doing away with constitutional rights and human rights.
That covers you publishing software. It doesn’t cover providing a service to criminals and personally profiting from it, and the constitution definitely gives the government authority to police that so it’s going to come down to how well they can prove that those guys were going more than just releasing code.
The tornado cash smart contracts simply encrypt your transaction. When you use it you are not profiting off of it. It would be akin to banning. The use of communication encryption protocol period this is completely unprecedented in the US.
That's not accurate: my choice to encrypt a message does not directly assist you in committing a crime but that is unavoidably true for using a mixer. The guy who was arrested wasn't just arrested because he released something on GitHub but because he operates a service with North Korea used to launder money and received payment for it, and it's the operations part which brings the most risk — that service isn't complying with legal requirements for record keeping and since it's not free to use, that means that there's a transaction record showing the operators receiving a non-trivial sum of money from a criminal group.
That last part is potentially defensible – bankers aren't charged just because a criminal stores money in a checking account – except that each KYC law not followed is not only its own offense but also a chance for prosecutors to argue that the decision not to do so was intentional and the operators knew their service was predominantly used by criminals. That's going to be an interesting case with potentially significant implications for the entire field.
1. Your choice to encrypt metadata can in fact make it more difficult to identify criminal correspondents. Your choice to use Tor similarly makes it more difficult to track criminals' web usage. Both of these help criminals to engage in certain nefarious actions.
To generalize, every user of a privacy protocol increases the protocol's anonymity set, and thus its utility to all users.
In other words, Tornado Cash shares this property with every other privacy protocol.
2. The guy who wrote the Tornado Cash code operated no aspect of the Tornado Cash smart contract. That operates entirely autonomously. It's code, deployed to a massively distributed blockchain, that any one can use to encrypt their transaction.
Yes, which is why most people do not run Tor exit nodes because it’s inherently riskier to have your equipment directly involved in legal activity. Tor is actually safer than this since the traffic is encrypted so a node operator can quite confidently say they don’t know the contents. Some of the charges in this case will depend on whether these developers were in fact similarly unaware of who their heaviest users were. That doesn’t help with charges related to not following KYC, of course, because unlike an IP network financial services are fairly heavily regulated.
Your belief expressed in #2 is at odds with the charges specifically saying he profited from money laundering activity. We’ll see when that goes to court exactly what that meant and whether there’s evidence suggesting that he knew where those fees were coming from.
The developers deployed the Tornado Cash code, and subsequently, had no control over it. They did control one of the front-ends to it, and they instituted blocking of transactions originating from hacks in that front-end. But criminals were free to use any front-end to access the deployed code, and there was no way for the developers to stop that.
In any case, what is being criticized in this particular thread is OFAC prohibiting all Americans from using Tornado Cash code. This is unprecedented, and clearly outside OFAC's statutory powers to sanction "entities".
Despite the US Treasury's claims, Tornado Cash is not in any way an entity, as it is not controlled by any party. It is simply code, running autonomously on a massively distributed blockchain. When someone uses it, they are using zero knowledge proofs to encrypt their transactions. The fact that this act of encryption adds their activity to the same anonymity pool as criminal activity is no more an argument for banning this encryption protocol as it is for banning any other encryption protocol.
Again, the problem is not the code but the running service. If you are involved in processing a transaction, you are required to follow applicable laws and risk consequences if you don’t. The technical details might explain how you got involved but they don’t remove the legal requirement.
That is not true. The original Satoshi paper has a whole section about it. So the intention of privacy was - at least in theory - there from the beginning.
Go to Archive.to, paste in any paywalled article, use reader mode on mobile and you can read it.
As long as these websites keep pushing the content to the client (for SEO of course), it’s fine for us to take it. If they truly want to be paywalled, DRM that text and stop reaping the benefits of Google search.
More like "WAS short for". Yes, Mark Karpales bought it from the original owner, and like PHP and GEICO, things have a way of moving away from their original meaning.
The original Bitcoin client also contained the beginnings of an online poker game, though that was quickly removed.
If you have $5000 in a bank account, and a bug in the bank UI lets you withdraw $10000, the bank can and will come after you to get their money back. And if you intentionally exploit this bug to create 100 accounts with $5000 and withdraw a million, you've definitely committed a crime.
I once had money deposited in to my account, repeatedly, that wasn't mine. It was a pain in the ass. I didn't want it.
I asked my gf's dad, a lawyer, if I could spend it. He said no: it's like someone parking their car on your driveway. It's annoying, sure. But it doesn't make it your car.
>Just keep stacking it in a savings account and collect the interest. If you wanted to take some risk you could also invest some of it in index funds.
A friend of mine is addressing a similar situation right now. After her mother passed away (nearly 20 years ago) and left no will, her primary bank account was still active and the Social Security Administration[0] kept sending her checks every month.
She was notified a few weeks ago of the existence of this account (which now has several hundred thousand dollars in it). Since Social Security benefits (except in specific circumstances[1]) are not collectible by surviving relatives, the moneys paid into that account since her mother's death are not hers (she and her siblings are the only surviving next-of-kin). Rather those funds are the property of the US Government.
In such a circumstance, the funds deposited, as well as any interest on those funds belong to the government.
Transferring those funds or spending any of the interest is a crime.
As such, if you find yourself in a similar situation, I'd think twice before doing something like that.
> Then why isn’t it illegal for a bank to make an error and keep _your_ money if the reverse is never going to be allowed to happen?
It… is.
The difference is that the bank (1) is often in a better position to automatically recover funds from you when they discover an error than vice-versa, (2) has better resources for collection via civil process if they aren’t in a position to automatically recover funds, and (3) has better connections with law enforcement to use if there is any indication of a criminal exploit.
