Bitcoin, a popular but risky tool for criminals

Bitcoin cryptocurrency is regularly criticized by regulators for its illegal use, but the transparency of its network can work against criminals, as Darkside hackers have learned the hard way.

These hackers, who received a giant $ 4.4 million ransom from the oil company Colonial Pipeline, paid in bitcoin, saw the $ 2.3 million confiscated by the authorities disappear. Their financial transactions, Deputy Justice Minister Lisa Monaco said on Monday.

“Tracking money is one of our main methods, but also the most effective,” Monaco said at a press conference.

How did the US authorities track these transactions when bitcoin is sometimes referred to as a decentralized and anonymous network?

For a classic bank payment, the police can contact the bank that sent or received the money, but for bitcoins, the ledger that records these transactions, blockchain or “blockchain,” does not require users to disclose their identity.

On the other hand, this “blockchain” is also publicly available: anyone can download it, watch their transactions, and then try to guess who owns the anonymous addresses that receive bitcoins.

If some users store their bitcoins in an offline wallet, such as a USB drive or hard drive, those from Darkside were still associated with an online account, the key of which, according to the US authorities, was recovered, without specifying if they hacked into the hackers’ account or if the informant sent them this sesame.

– $ 350 Million in Ransom –

In 2019, a blockchain analysis allowed the British and American authorities to dismantle the child pornography network and arrest over 300 people in 38 countries.

Sophisticated transaction tracking has become a real industry. Firms specialized in the analysis of blockchain cryptoassets have been developed, such as Chainalysis in the US or Elliptic in the United Kingdom.

According to a February report from Chainalysis, illegal cryptocurrency transactions reached $ 10 billion in 2020, or 1% of total cryptocurrency activity last year and half the year earlier, when these transactions hit a record $ 21.4 billion.

“Cryptocurrencies remain attractive to criminals, mainly because of their anonymity and ease of sending funds around the world, despite their transparent and traceable nature,” the company explains.

The number of ransoms paid in cryptocurrencies has already skyrocketed in 2020, reaching nearly $ 350 million.

Elliptic analysts believe they have identified the bitcoin wallet that received the ransom paid by Darkside’s Colonial Pipeline and verified that at least another $ 4.4 million payment was made.

-Russian hydra-

It is important to note that transaction analysis can help identify the bitcoin selling platforms to which the wallet returned the illegally obtained bitcoins.

“This information will provide law enforcement with important information to identify criminals,” Elliptic researcher Tom Robinson wrote in a note.

Market regulators have put pressure on cryptocurrency trading platforms. Many of them, like Coinbase, now require their users to disclose their identity before making transactions.

But other platforms don’t follow the same rules.

Both Elliptic and Chainalysis point to the growing role of Hydra, a darknet-accessible sales site for Russian-speaking customers, a version of the Internet that is not referenced by search engines and where users can remain anonymous.

“Hydra offers to withdraw money, as well as drugs, hacking tools or fake documents,” says Robinson.

Using both sites like Hydra and cryptocurrency, Darkside hackers have reportedly already resold some of the redeemed bitcoins.

As the price of bitcoin has soared in recent months (+ 240% to nearly $ 33,000 on Tuesday afternoon), regulators are adjusting their strategies.

The Bank of England said on Monday that payments in stablecoins, fixed-price cryptocurrencies, should be regulated with the same rigor as bank payments.

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