
How Dirty Money Disappears into the Black Hole of Cryptocurrency - chollida1
https://www.wsj.com/articles/how-dirty-money-disappears-into-the-black-hole-of-cryptocurrency-1538149743
======
seibelj
Meanwhile, a fully-regulated and ostensibly compliant EU bank in Denmark
laundered $233 billion through a single bank branch [0].

I would argue that crypto is actually an investigator's dream, as you can
trace transactions instantly through the blockchain without needing to follow
the money in multiple jurisdictions, faxes, waiting periods, cooperating with
other law enforcement, etc. etc.

[0] [https://www.washingtonpost.com/business/2018/09/19/ceo-
denma...](https://www.washingtonpost.com/business/2018/09/19/ceo-denmark-bank-
quits-amid-an-alleged-billion-money-laundering-
investigation/?noredirect=on&utm_term=.fcf63e625508)

~~~
loceng
I don't mind blockchain as a mechanism to keep track of transactions, I don't
like it being designed with Ponzi and Pyramid scheme structures embedded.

~~~
gruez
>I don't like it being designed with Ponzi and Pyramid scheme structures
embedded.

devil's advocate: what's wrong with Ponzi and Pyramid schemes that are clearly
advertised? it's pretty much guaranteed that people will lose money on them
(negative EV), but how are they any worse than say, slot machines that are
also negative EV?

~~~
loceng
To reply to your edit-addon re: slot machine - You walk into a casino to
hopefully know you're getting played (a specific context), however Ponzi and
Pyramid schemes are subtle - and people you trust or don't trust will
influence or manipulate you into "playing" the game [100% of the time so far
people promoting it that I've talked to outright deny any function as Pyramid-
Ponzi scheme], and you run into them the more the hype-shallow marketing-level
"positive" information hits mainstream media, and you get more people (army of
HODLers; Pyramid scheme) trying to sell you with shallow and/or purposeful
misinformation/information. That's very different than going to a physical
place, to a casino, and playing a slot machine. I'm surprised you don't see
that difference yourself?

~~~
gruez
>however Ponzi and Pyramid schemes are subtle - and people you trust or don't
trust will influence or manipulate you into "playing" the game [100% of the
time so far people promoting it that I've talked to outright deny any function
as Pyramid-Ponzi scheme]

but OP's comment is about schemes that are embeded into the currency itself

>I don't like it being designed with Ponzi and Pyramid scheme structures
embedded.

presumably as some sort of smart contract. in which case every participant
should know (or can find out) that it's a ponzi/pyramind scheme.

>and you run into them the more the hype-shallow marketing-level "positive"
information hits mainstream media, and you get more people (army of HODLers;
Pyramid scheme) trying to sell you with shallow and/or purposeful
misinformation/information. That's very different than going to a physical
place, to a casino, and playing a slot machine. I'm surprised you don't see
that difference yourself?

that's a fair point. "traditional" gambling don't incentivize people to market
for them.

~~~
loceng
If they don't have a fixed value (and perhaps requirement that they aren't
private) then they're decentralized Ponzi-Pyramid schemes with a promise and
tie-in into technology - which doesn't nullify the negative scheme structures.

------
gammateam
This is a Monero puffpiece masquerading as a vilification of Shapeshift.

Erik Voorhees' "cavalier" approach to the man's collection efforts are honest
in that even the best Anti-Money Laundering/Know Your Customer implementation
would not reveal the origin and destination of the funds when using Monero.

The quaint mention of Monero in this article is foreshadowing of more amazing
informative pieces about this form of money. In this piece, they intentionally
conflate what Shapeshift does with how other exchanges operate. They
intentionally conflate Monero with all cryptocurrencies.

It is an interesting way of writing

But I think this will be followed up with more productive articles

The Wanna-cry ransomware did not collect millions of dollars. It barely
collected $100,000 before the patch rolled out. The very public nature of the
Wanna-cry attack and patch revealed that the same NSA tool was being used on a
Monero mining botnet for weeks before hand already. and THAT was making
millions of dollars, but the ransomware people ruined it!

Alright I'm going to call it, this is shoddy journalism. Glad to see the
Monero mention

~~~
samstave
Where can I learn more about the monero nsa mining botnet?

~~~
gammateam
Basically Shadowbrokers claimed to hack the NSA with a datadump of the NSA's
hacking tools. They offered a bounty for it and nobody took it

Eventually they released a sample which contained real exploits with unheard
of vulnerabilities

A few weeks later the Wanna-Cry ransomware had weaponized those
vulnerabilities and spread world wide really quickly, attracting way too much
attention and a fix rolled out

The attention revealed that the exploit had been weaponized almost immediately
a few weeks earlier for a very smart and stealthy Monero mining botnet, which
made way more than Wannacry did

People still use the leaked NSA exploits to hack computers and run Monero
botnets.

[https://cointelegraph.com/news/newly-detected-malware-
uses-n...](https://cointelegraph.com/news/newly-detected-malware-uses-nsa-
exploit-to-mine-monero-over-500k-pcs-infected)

yes, we've all heard misinformation about bitcoin being untrackable, but
Monero is the real deal for now, with the pros and cons and possible attack
vectors researched and published about

------
rrggrr
Please... the metals markets, where holdings can be reconstituted, aggregated,
faked and leveraged is the undisputed champion for big time laundering. Two
favorite examples:

[https://qz.com/216059/chinas-investigation-into-missing-
meta...](https://qz.com/216059/chinas-investigation-into-missing-metal-could-
spark-a-much-bigger-crisis/)

[https://www.miamiherald.com/news/local/article195552089.html](https://www.miamiherald.com/news/local/article195552089.html)

~~~
joe_the_user
Not to discount the metal markets or just corrupt banking, but crypto currency
clearly has the advantage of being transmissible weightlessly anywhere in the
world.

~~~
ChuckMcM
Imaginary metal is weightless as well :-) And what it doesn't have is a chain
of transaction receipts showing where it has been.

~~~
joe_the_user
Imaginary metal is akin to a bank token, indeed easy to transport but
connected to people & institutions (kind of like, money). And it eventually
has to be traded for real metal.

Just about everything of value has it's pluses and minuses for avoiding state
scrutiny (land, cash, enterprises dealing in a lot of cash, start-ups needings
lots of cash, halal banking, underground economy equivalents, etc, etc). With
the interlocked problems of capital controls, drug cartels, failing states and
resource economies (China, Brazil, Mexico, Afghanistan, Congo, etc), the river
of dirty money is huge and goes everywhere. And efforts at control are
naturally quite large too ("how much control over how dirty a flow" is what
the lobbyists now place bids for, right, with the money itself coming partly
from these flows. But those who've escape enough of their capital want to plug
up the capital of their competitors, naturally).

Still, the advantage of turning a raw resource (energy) into money is a
tremendous boon to those who control resources but don't technically own them
(from bureaucrats to warlords).

And, of course, the blockchain shows the flow of tokens from account to
account but it neither shows who owns the account nor the reason for the flow.
Someone might guess but guesses aren't evidence in a conveniently large number
of places.

~~~
joe_the_user
Actually, I still didn't distinguish bitcoin-for-money-laundering from credit-
accounts-for-money-laundering.

The thing is that a credit-account may indeed have the advantage that the
trail of money might be lost.

However a bitcoin has the advantage that a bitcoin trader doesn't have to
depend on any one single institution or entity to secure the claim for their
wealth. A state can look at a bank or a gold-account company or whatever and
say "you must invalidate this account in particular, I'm watching" and the
account-holder loses their money, _no matter where they are in the world_ ,
even in their island hideout, etc. The state may look at a given bitcoin, see
it's been by the Lord's Resistance Army to sell human heads or whatever but
the state can't do anything if that state can't find where in the world the
holder of the account is.

To catch the actual illegal money, States would have to require all exchanges
and buyers have filters to stop bitcoins they declared illegal (not that
states necessarily shy away stuff like that as we've seen but it's clearly
harder).

Which isn't saying bitcoin's absolutely better but it presents some uniquely
better aspects "for the discerning money launderer" (don't let this bit of
sarcasm lead you think I'd approve of such scum btw).

------
olivermarks
Given the incredible amounts of dirty money that goes into global
property/real estate there is an element of chutzpah about dinging crypto
[https://www.goodreads.com/book/show/1906500.McMafia](https://www.goodreads.com/book/show/1906500.McMafia)

~~~
drawkbox
When they looked into high-end real-estate in 2016, up to 30% of all deals
were suspicious of being money laundering. [1] They looked just primarily at
New York, Miami, Los Angeles and other big markets.

> _The rules cover properties purchased for more than $3 million in Manhattan,
> properties over $1 million in the southern Florida locations, over $2
> million in the California locations and more than $3 million in the Hawaii
> locations._

> _Treasury said that among the transactions covered by the rules over the
> past year "about 30 percent... involve a beneficial owner or purchaser
> representative that was also the subject of a previous suspicious activity
> report."_

It makes you wonder how much the real estate market is inflated due to money
laundering and foreign funds flowing in for washing or investments, keeping
real customers out of the market.

Fact is money laundering is a problem in real-estate, art, crypto, political
campaigns [2] (with Citizens United) and more.

[1] [https://www.cnbc.com/2017/08/24/a-third-of-luxe-real-
estate-...](https://www.cnbc.com/2017/08/24/a-third-of-luxe-real-estate-deals-
involve-suspicious-activity.html)

[2] [https://theintercept.com/2016/08/03/citizens-united-
foreign-...](https://theintercept.com/2016/08/03/citizens-united-foreign-
money-us-elections/)

~~~
gammateam
> subject of a suspicious activity report

OH come on.

Bank tellers file suspicious activity reports for any arbitrary reason. The
only people these SARs ensnare are poor-ish people that accidentally
structured a cash transaction and it looked like they were trying to avoid the
$10,000 reporting threshold. I've read enough appeals court cases to see that
it doesn't catch actual money laundering from illicit sources.

And with the real estate industry successfully lobbying Congress from an
exemption to anti-money laundering laws, I don't think these wealthy people
will ever be investigated from a "Suspicious Activity Report" since there
isn't a legal framework to further investigate.

~~~
drawkbox
Agreed on messing with small players and real estate getting favorable
treatment, but did you miss the part where they were in million+ properties
with shell corporations?

> _Treasury this week expanded and extended a program targeting luxury real
> estate deals in New York, Miami, Los Angeles and other big markets to
> prevent the use of real estate for money-laundering by overseas buyers. The
> program was designed to prevent buyers from using shell company 's or LLC's
> to hide the identities of the real buyers._

~~~
gammateam
Yeah I remember when that article came out. Did it work?

The federal government doesn't regulate what kind of business entities their
states offer. And you can always use a lawyer on the incorporation forms if
that state asks for more info and have your whole entity protected by client
attorney privilege.

There's no probable cause to raid the lawyer, and the money is magically clean
in the property now.

------
CryptoPunk
The quest to stop "money laundering" is totalitarian in nature. It is not
reasonable to stop crime by way of having total awareness of the source of
every individual's financial holdings.

Such a quest rationalizes warrantless mass-surveillance of the economy, which
gives AML agencies and their deputies in the banking sector an unreasonably
broad view of the private financial interactions taking place in the economy,
and by negating the fungibility of money, undermines its usefulness.

Money is only useful to the extent that every unit is interchangable, accepted
at face value without prejudice, and can be used without compromising its
user's privacy. That means all money must be assumed 'clean' unless proven
dirty. Treating everyone as suspect and forcing them prove their money was
legitimately acquired in order to utilize it is taking exactly the opposite
track.

~~~
danans
> The quest to stop "money laundering" is totalitarian in nature.

The point is to raise the risk/cost of money laundering and to minimize its
occurrence, otherwise financial fraud becomes culturally normalized, and not
something people avoid. For that, anti-money laundering agencies must pay
attention to large transfers between anonymized business entities. That's very
different than total-awareness of every individual's financial holdings and
small transactions.

> by negating the fungibility of money, undermines its usefulness

Reducing the fungibility (i.e. by increasing the reporting and oversight
requirements) of _large_ transfers of money doesn't undermine its usefulness
for anything other than money laundering. Most transactions of life fall well
below the 10k reporting limit, and those that are above (i.e. purchasing a
car) tend to be on-the-record.

~~~
CryptoPunk
>>The point is to raise the risk/cost of money laundering and to minimize its
occurrence

Of course, that's the point. But the means is totalitarian.

>>otherwise financial fraud becomes culturally normalized

There are other ways to investigate and prosecute crime besides doing away
with due process and protections against warrantless searches.

Fraud leaves a massive evidence trail. In many jurisdictions the problem is
law enforcement simply not starting a criminal case against those involved in
blatant fraud, or taking years to file charges, giving the fraudster time to
victimize countless parties before they finally face consequences.

So there's no lack of information to use to prosecute those committing fraud
without the total surveillance approach.

>>For that, anti-money laundering agencies must pay attention to large
transfers between anonymized business entities.

Anything of significance about the operations of individuals and companies can
be known by tracking transactions above $10,000.

Requiring that these transactions be reported totally circumvents the
traditional limits on government searches, which required a warrant issued by
a judge.

This is dragnet warrantless surveillance of trillions of dollars of
transactions that creates information asymmetries the likes of which have
never existed before.

>>That's very different than total-awareness of every individual's financial
holdings and small transactions.

Most small transactions aggregate to larger ones. Having to explain the source
of a large deposit to a bank requires providing evidence of the smaller
transactions that formed the holding.

It amounts to AML agencies and the banks they've deputized having near total
knowledge of the financial history of every individual.

An enormous amount of proprietary information can be gleened from this, which
inevitably contributes to centralization of power, and I imagine, income
inequality.

>>Reducing the fungibility (i.e. by increasing the reporting and oversight
requirements) of large transfers of money doesn't undermine its usefulness for
anything other than money laundering.

People have their money frozen for months at a time by banks, and have to
comply with incredibly intrusive requests for private and hard to acquire
information to get it unfrozen.

People have their bank accounts closed without explanation because the bank
identifies some aspect of their financial profile, like affiliation with a
legal marijuana dispensary, as too risky for their AML program. Or because the
source of their money, while legal, is perceived as high-risk by the bank. So
money is not fungible. Revenue from one legal source is treated differently
than revenue from another.

And people can't just use cash. The AML drive has resulted in a situation
where moving large amounts of cash is not safe, as billions of dollars in cash
have been confiscated from individuals without even any charges being laid
against them, through civil forfeiture and the principle that cash is
"suspicious":

[http://time.com/4878195/civil-asset-forfeiture-jeff-
sessions...](http://time.com/4878195/civil-asset-forfeiture-jeff-sessions/)

------
gammateam
> "The exchange’s system lets people see which anonymous wallets received
> cryptocurrency, but in the case of Monero, recipient addresses and
> transaction amounts remain secret and the trail is severed."

> The way this reads makes it seem like the Shapeshift exchange is
> intentionally hiding something in order to facilitate criminals. This is
> negligent journalism deliberately written for you to form a particular
> opinion about cryptocurrencies in general. The Monero payment network
> doesn't publicly reveal recipient addresses and transaction amounts? This is
> a feature.

the real story is in the comments.

------
dajohnson89
non-paywall link please?

~~~
gruez
[https://www.facebook.com/l.php?u=https://www.wsj.com/article...](https://www.facebook.com/l.php?u=https://www.wsj.com/articles/how-
dirty-money-disappears-into-the-black-hole-of-cryptocurrency-1538149743)

~~~
tempuser24
I haven't seen this work around before. Brilliant in it's simplicity.

~~~
airstrike
you can always just add the prefix "full" right before wsj.com like this

[https://www.fullwsj.com/articles/facebook-flaw-allowed-
hacke...](https://www.fullwsj.com/articles/facebook-flaw-allowed-hackers-to-
take-over-user-accounts-1538153947?mod=hp_lead_pos1)

