Feds Arrest Bitcoin Fog Founder For Laundering $336 Million In Bitcoin
US authorities have recently arrested the administrator of the notorious dark web network, Bitcoin Fog, which helps its clients to hide the source and destination of their crypto assets, for laundering $336 million in bitcoin.
According to an official filing, the suspect who is of Russian-Swedish origin, Roman Sterlingov, was arrested in Los Angeles on Tuesday.
As per the report, despite cleverly hiding the crypto activities of his clients, the IRS was led to Sterlingov by a trail of his transactions that he had conducted 10 years ago.
Bitcoin Fog’s Mode of Operation
Bitcoin Fog allows users who wish to conceal their crypto transactions to combine it with those of others to prevent anyone inspecting the blockchain from tracking any individual’s payments.
Sterlingov started this site back in 2011 and had even promoted it on the BitcoinTalk forum, under the alias “Akemashite Omedetou,” which is a Japanese phrase that means “Happy New Year.”
In the post, he claimed that Bitcoin Fog “[mixes] up your bitcoins in our pool with other users… can eliminate any chance of finding your payments and making it impossible to prove any connection between a deposit and a withdrawal inside our service.”
Sterlingov took commissions of between 2 to 2.5 percent for facilitating those transactions on Bitcoin Fog. According to the calculations made by the IRS, Sterlingov had allegedly made $8 million worth of bitcoin at the time of transaction while running the site.
Is Bitcoin’s Anonymity Compromised?
While bitcoin is praised for being a tool for making anonymous transactions, another quality of it was used to fish out Bitcoin Fog’s administrator— its transparency.
According to the report, the IRS had traced Sterlingov using a list of personal transactions he had conducted in 2011 which he allegedly used in setting up Bitcoin Fog’s server hosting. These transactions were public and open to everyone on the blockchain.
Speaking on this, Sarah Meiklejohn, a computer scientist at University College of London whose work pioneered the Bitcoin-tracing techniques in 2013 said,
“With blockchain analytics, the thing we say over and over is that all this activity is on this ledger forever, and if you did something bad 10 years ago you can be caught and arrested for it today.”
Chainalysis’ co-founder, Jonathan Levin added,
“This is yet another example of how investigators with the right tools can leverage the transparency of cryptocurrency to follow the flow of illicit funds.”
Sterlingov is currently charged with laundering more than 1.2 million bitcoins, worth over $336 million at the time when the payments were made, for over the 10 years that he allegedly ran Bitcoin Fog.