On March 12, Russian-born Swede Roman Sterlingov was convicted by a federal jury in Washington, D.C., of conspiracy to commit money laundering and other violations for operating Bitcoin Fog. ) service, where criminals exploited Bitcoin Fog to launder money, which authorities claim involved hundreds of millions of dollars. For ill-gotten gains.
The U.S. Department of Justice hailed the conviction as a victory for cryptocurrency crimes, but Stringoff’s lawyers insist the case against him is flawed and plan to appeal. They claimed that the emerging science used to gather evidence against him was not fit for purpose.
The DOJ investigation used blockchain forensics technology, which allows investigators to scrutinize public traces of cryptocurrency transactions to map the flow of funds. U.S. Deputy Attorney General Lisa Monaco said in a statement that the Justice Department is “painstakingly tracing Bitcoin through the blockchain” to identify Sterling Goff as the person behind the Bitcoin fog. Pseudonymous administrator.
Bitcoin and other cryptocurrencies have gained an undeserved reputation for being harder to trace than traditional currencies, but evidence gathered this way has led to the arrest of many criminals over the past decade. Blockchain forensics will be crucial in the trial of Ross Ulbricht, founder of the notorious Silk Road marketplace. But in the Bitcoin Fog case, the defense put this investigative technique in the spotlight, effectively putting the crypto tracing on trial for their clients. Tor Ekeland, Stringoff’s legal counsel, said the case was “the first of its kind”. “No one has challenged blockchain forensics before because it’s completely new.”
Before Stringoff’s trial, his lawyers asked the presiding judge to determine whether evidence from blockchain forensics experts, who used software from a company called Chainaanalysis that speeds up otherwise cumbersome blockchain work, was admissible. chain screening process. He ruled that the evidence was admissible.
Chainaanalysis CEO Michael Gronager viewed the decision as an endorsement of his company and its approach. “We are now the only company in the world recognized for our ability to study blockchain and create evidence,” he said. But Ekland said he would work with Stringoff to appeal the guilty verdict and the judge’s ruling on the validity of blockchain evidence. Ekland claimed that Stringoff’s conviction was the latest example of an unfortunate phenomenon in which “emerging junk science leads to unfair sentences.”
Beth Bisbee, former head of U.S. investigations at Chainaanalysis, disputes that characterization. “The government presented evidence to the jury that suggested the opposite was true,” said Bisbee, who testified as an expert witness at the trial. “Our approach is transparent, tested, vetted and reliable.”
National Security Council Threat
Before being shut down by U.S. law enforcement in 2021, Bitcoin Fog had been offering a so-called cryptocurrency mixing or cryptocurrency tumbling service. Funds belonging to multiple parties are pooled, commingled, and put into entirely new wallets, obscuring the origin of the tokens held by each party. Mixers were initially promoted as a way to increase the level of cryptocurrency privacy that consumers could afford, but they can easily be used for money laundering purposes. The U.S. Department of Justice said Bitcoin Fog was one of the earliest mixers to emerge in 2011, making it “the longest-running Bitcoin money laundering service on the dark web.”
Over the past few years, the U.S. government has been cracking down on cryptocurrency mixers, which it considers a threat to national security. After banning Bitcoin Fog, the U.S. Treasury Department sanctioned another mixer, Tornado Cash, in 2022. The following year, the U.S. Treasury Department banned another currency mixer, ChipMixer, and accused its founder of money laundering. In order to identify the individuals behind these operations, investigators must track the cryptocurrencies.