Usually it involves conversion of illegally gained assets into untraceable cryptocurrencies such as XMR (Monero) and then subsequent funneling and conversion of those assets back into USD via offshore exchanges.
IRS is offering $625,000 USD to anyone that can crack the Monero algorithm [1].
Because trackable doesn't mean "always trackable to a real human identity who's the original source". Bitcoin transactions are trivial for anyone to track, since everything is recorded on the public blockchain, but you can't necessarily follow the trail to the true culprit even if you're law enforcement. Especially if there are non-cooperative entities in the chain who are completely outside of your jurisdiction.
Though, the true answer to your actual question is what the other commenter said: it's mainly due to the Russian government turning a blind eye to it as long as they don't target Russian/ex-USSR citizens. So even if you do know a ransomware operator's full name and home address and everything else you can possibly know about them, you can't do anything about it besides hope they leave the country and try to catch them then.
Because they're typically based in Russia, and Russia has a policy that it will not prosecute its citizens for computer crimes unless they perpetrated them against Russians or Russian organizations. My understanding is most ransomware has code to detect Russian computers (e.g. by checking localization settings), and will refuse to run if it finds itself on one for that reason.
Because Russian banks need to be capable of transacting with American banks and directly receiving money that is Ransom Payment related is a bad business decision.
No I'm saying a Russian bank probably doesn't look past the deposit. But if the deposit comes from America then an American bank will ask for it back when the US govt tells it to and then the bank will do so because it's good business. So I would imagine most ransomware gangs just keep the money in bitcoin and only pull out what they need to when they need to.
> So why not just send the payment to a Russian bank?
I don't know, I'm not a Russian in the ransomware business.
But I speculate that doing it that way might be so blatant and inconvenient to the Russian government that it might get the policy that protects them changed. Also, I'd imagine any bank that accepts such payments would quickly get itself blacklisted. This stuff isn't actually binary, so it's not smart to take it to the limit.
If ransomware used PayPal accounts or bank numbers those payments would quickly start being censored to cut off their payment rails. The value of crypto is all rooted in censorship resistance, not anonymity.
Wouldn't it have to be an agency in their own jurisdiction that would prevent the hacker from accessing banking services? They would make an effort to shut down the hackers bank account but not prosecute them?
The pressure point in the traditional financial system is not the Russian authorities cutting off the Russian hacker from a Russian bank, it's SWIFT cutting off the Russian bank from the global financial system.
I'm pretty sure mixers are currently illegal and will be treated as such once the debate starts.
Money laundering (aka, pooling cash together to make it harder to track) is defacto illegal by itself, even if you use the money for legitimate purposes.
What you described is not illegal by itself. Obfuscating the origin of earnings is not illegal. Although "pooling" may be regulated in other ways.
A federal "money laundering" charge requires an illicit origin, and so since successful money laundering will never have an illicit origin, the charge can only be tacked on to another indictment.
After centuries of not having much surveillance tools of the money supply, the state has had a 50 year run of the privilege of deputizing financial intermediaries to surveil the electronic payment system. Now the electronic payment system will begin to inherit the same tenets of cash. This is just a reversion to the mean.
> A federal "money laundering" charge requires an illicit origin, and so since successful money laundering will never have an illicit origin, the charge can only be tacked on to another indictment.
Fair.
But think about it: a _singular_ person in your mixing pool can make the entire pool illegal. One, singular, person using that money for contraband (illegal porn, illegal drugs, illegal tax evasion) will turn the entire pool illegal.
Do you trust everyone else in the pool to be using it for legitimate gains? If you went into court, would you be able to say with a straight face that "Everyone in my mixing pool was in fact, doing legal activities?"
So in practice, I'd argue that most mixers are illegal (because surely, there's at least one person using the mixer for illegitimate purposes). Furthermore: the BTC transaction into the pool (and out of the pool) will forever be written into the blockchain. If you use your same wallet for both sides (or if the prosecutors can prove that one of your wallets was on the input-side, and another one of your wallets was on the output-side of the mixing process), you're now tied to all of the illegal activities that mixing pool is associated with.
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That's the thing. Mixing pools have never been tested in court. But imagine what a prosecutor would say to a jury, and imagine what the jury would rule.
>But think about it: a _singular_ person in your mixing pool can make the entire pool illegal. One, singular, person using that money for contraband (illegal porn, illegal drugs, illegal tax evasion) will turn the entire pool illegal.
It's very difficult to know, but I'm leaning towards this not holding up in court. At least not upon appeal. If a mixer has tens of millions of known participant addresses and the government tries to argue that merely owning a single address that received anything from the mixer means you aided and abetted some other crime from some other person who used the mixer, I think the defense could point out how that just isn't remotely statistically sufficient to imply any sort of involvement.
>Do you trust everyone else in the pool to be using it for legitimate gains? If you went into court, would you be able to say with a straight face that "Everyone in my mixing pool was in fact, doing legal activities?"
I'm not sure if proving a negative will work. Now, if they can prove you had knowledge at the time that at least one person used it illicitly, then I think it'd depend how the mixer works. If it works so that any "dirty money" is purged out within the next few transactions, then they might have to prove that you sent or received funds close to those distribution windows and had specific knowledge that some specific illegal act was likely occurring at that time.
I see how they could potentially prosecute the owners of the mixers, if the owners are aware of at least one case of criminal use, but prosecuting the users sounds much more difficult.
At least given today's political environment, I can very well see a simple argument consisting of:
* "The only reason to use a mixer is to hide money"
* "You joined a pool of millions of individuals, all of whom had the explicit goal of hiding money from the traditional financial system".
* "You (probably) knew that the money you get in your output wallet comes from a random individual in the pool".
As such, the implicit assumption in a reasonable person's mind is: this money you got is absolutely from someone else who was trying to hide their money. The law also states that aiding and abetting them is illegal in of itself.
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> If it works so that any "dirty money" is purged out within the next few transactions, then they might have to prove that you sent or received funds close to those distribution windows and had specific knowledge that some specific illegal act was likely occurring at that time.
Well, the issue with "faster moving" mixers is that it more closely connects the dirty money with the source. "Slow moving" mixers with larger pools are more entangled, harder to know where the money came from.
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I dunno. The RAII has been mildly successful in court over IP addresses used in Bittorrent peers, right? That seems to be roughly the same level of involvement as we're seeing here. I'm not necessarily saying you're going to get jailtime, but you probably will be roped into the court case if someone in your pool was doing something sketchy.
You're worried about the distraction and inconvenience of a trial court case, me and the person you replied to are confident in the appeals courts - where there is no jury to appeal to the emotion of but where the arguments are much more constitutional and procedural based.
>As such, the implicit assumption in a reasonable person's mind is: this money you got is absolutely from someone else who was trying to hide their money. The law also states that aiding and abetting them is illegal in of itself.
Is hiding money inherently a crime, though? I think it only might be if you're trying to violate a specific law regarding transparency. Naturally, if you're using a mixer, you must be trying to hide your money or how you're using the money, so if that much is illegal then you can skip all the arguments about the source of the other funds in the mixer. But if it isn't illegal, then I think you might need to tie it to belief that a specific crime likely occurred.
I'm definitely not a lawyer and could be totally wrong. But that's the defense I'd give, at least. Unless mixers are explicitly declared illegal, or unless there are explicit reporting requirements which you're evading (e.g. they have reason to believe that you used the mixer to evade taxes), the accusation just seems too weak and vague.
>Well, the issue with "faster moving" mixers is that it more closely connects the dirty money with the source. "Slow moving" mixers with larger pools are more entangled, harder to know where the money came from.
That's true. The better the mixer, the harder it might be to prove you aren't guilty if you're not guilty. But, at the same time, the harder it might be to prove you are guilty if you actually are guilty. (Assuming the crime in question is what the mixing was allegedly abetting, like a cryptocurrency exchange heist or something.)
>I dunno. The RAII has been mildly successful in court over IP addresses used in Bittorrent peers, right? That seems to be roughly the same level of involvement as we're seeing here. I'm not necessarily saying you're going to get jailtime, but you probably will be roped into the court case if someone in your pool was doing something sketchy.
That seems very different to me. The inherent act of downloading or uploading the content is illegal. So if an IP registered to your name and home address is downloading the content, then it's just a matter of trying to prove that you likely initiated that activity. The IP's "guilt" is already a given.
I think it'd only be analogous if mere use of a mixer is also itself illegal; even assuming a scenario where no one is using it to help with any other crimes. But if it is, then it's just begging the question, since using it would be illegal because it's illegal to use. And then it'd just be a matter of proving you had access to and were using that cryptocurrency address at that time, since the address's "guilt" is already established.
Structuring/smurfing is done to evade specific bank deposit reporting requirements, though. Unless there's a specific requirement you're trying to evade (e.g. an exchange must, by law, report deposits or balances over a certain size), I don't know if the general notion of "hiding" can be considered illicit.
I had not chimed in on mixers, only money laundering charges. There are plenty of other ways to obfuscate the origin of crypto without using mixers.
Although I don't agree with how you extrapolate other legal scenarios to one about mixer users, I'm also not worried about juries, the judges especially on appeal are where your rights matter and would not be swayed by emotional arguments like a jury. You are pretty much paralyzed if you are always worried about what prosecutors can target you for and what juries can be swayed to do.
I'm not sure how to phrase this. But I'm reminded of the dark knight returns where because all the mobs pooled their money together with their launderer (their mixer) they could all be prosecuted together in a RICO case. Is use of a mixer de facto evidence of laundering...
It’s relatively trivial to use a mixer, just like sending any other transaction. The mixer deals with all the complexity. However almost all mixers have been eventually compromised. It’s likely chainalysis and others can easily demix the transactions, so they really shouldn’t be entirely trusted.
Just want to point out it's not quite that easy: If you convert 1.24 (or whatever) bitcoins into zcash/monero/etc and then 1.24 right back into bitcoins, everyone will know those transactions were likely connected.
I should think that it would be obvious that you don't put in 1.24 BTC and then take out 1.24 BTC later. Someone trying to hide the source of their funds via a mixer or Monero or whatever would put in 1.24 BTC and take out 1 BTC + 0.2 BTC + 2*(0.02 BTC) (or some other set of common denominations) in separate transactions to distinct BTC wallets, taking steps to ensure that these transactions can't be correlated with each other by IP address, time, etc. They want to hide the withdrawals in a sea of indistinguishable, uniform transactions; moving a unique, traceable quantity all at once would be a clear red flag. The principle is hardly obscure; it's exactly the same as the popular image of criminals conducting business with suitcases full of unmarked $20 bills. They use $20 bills because they're commonplace, not because they're more convenient than $50 or $100 bills.
