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Feds Arrest an Alleged $336M Bitcoin-Laundering Kingpin (wired.com)
19 points by pmastela 17 days ago | hide | past | favorite | 5 comments

Lots of interesting details in there, but I imagine a lot of HN users are particularly looking for this tid bit.

> Most remarkable, however, is the IRS's account of tracking down Sterlingov using the very same sort of blockchain analysis that his own service was meant to defeat. The complaint outlines how Sterlingov allegedly paid for the server hosting of Bitcoin Fog at one point in 2011 using the now-defunct digital currency Liberty Reserve. It goes on to show the blockchain evidence that identifies Sterlingov's purchase of that Liberty Reserve currency with bitcoins: He first exchanged euros for the bitcoins on the early cryptocurrency exchange Mt. Gox, then moved those bitcoins through several subsequent addresses, and finally traded them on another currency exchange for the Liberty Reserve funds he'd use to set up Bitcoin Fog's domain.

> Based on tracing those financial transactions, the IRS says, it then identified Mt. Gox accounts that used Sterlingov's home address and phone number, and even a Google account that included a Russian-language document on its Google Drive offering instructions for how to obscure Bitcoin payments. That document described exactly the steps Sterlingov allegedly took to buy the Liberty Reserve funds he'd used.

Who knows what other parallel constructions efforts or tips offs may have come into play. But data leaks from hacked / defunct exchanges being traced over such a long timeline is surprising.

is this really illegal? couldn’t you use a mixer for perfectly legal reasons? like say hiding money from your friends? why should he be liable for why people choose to use the service

Using it isn't (although it will raise suspicion). Operating one is, as it involves what the US calls "money transmission", which is a licensed, heavily regulated business.

This person is accused of transmitting money without a license. It's the same charge that would be brought if you were hosting a custodial wallet that permits deposits and withdrawals, and didn't have a money transmitter license and comply with the regulations that apply (such as knowing and storing the ID of all of your customers, and making sure they're not on OFAC's lists of banned countries or banned persons). The mixing doesn't actually enter in to it.

Sterlingov? Nominative determinism?

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