Bitcoin proves a double-edged sword for criminals

Regulators have repeatedly criticized the growth of cryptocurrencies like Bitcoin for their popularity with criminals, but the technology’s transparent transactions can also work against law breakers.

This is a lesson learned the hard way by cybercriminal hackers Darkside after the organization withdrew a ransom of $ 4.4 million from the oil company Colonial pipeline with bitcoins.

After the ransomware extortion that forced the shutdown of a major fuel network in the eastern United States last month, the US Department of Justice said it recovered $ 2.3 million in funds by tracking financial transactions.

“Tracking the money remains one of the most basic but powerful tools we have,” said US Assistant Attorney General Lisa Monaco on Monday.

Financial forensics for tracking crypto transactions is more complex in the decentralized and anonymous networks.

With traditional bank payments, the police can contact the bank that sent or received the money, but with Bitcoin, the registry that records those transactions – the blockchain – doesn’t ask users to reveal their identity.

But the blockchain is also public and available for anyone to download and find out who might own the anonymous addresses where the bitcoin arrives.

While some users keep their bitcoins safe in an offline wallet, for example on a USB stick or hard drive, Darkside’s bitcoins were always linked to an online account.

Without specifying how they got there – whether through hacking or an informant – the US authorities stated that they could access the “private key” of the hackers’ online account.

In 2019, an analysis by the blockchain-enabled British and American authorities enabled a child pornography ring to be dismantled and more than 300 people to be arrested in 38 countries.

The complex tracking of transactions has grown into an industry of its own. Companies specializing in blockchain analysis have emerged, such as Chainalysis in the US and Elliptic in the UK.

– Russian hydra –

According to a Chainalysis report released in February, cryptocurrency transactions for illegal purposes hit $ 10 billion in 2020, one percent of total cryptocurrency activity for the year. In 2019, criminal activity involving online currencies hit a record $ 21.4 billion.

The total cost of ransomware payments in cryptocurrencies alone rose to nearly $ 350 million in 2020.

“Cryptocurrency remains attractive to criminals, largely because of its pseudonymous nature and the ease with which users can instantly send money anywhere in the world,” Chainalysis said.

Elliptic analysts believe they have identified the bitcoin wallet that received the ransom payment from Colonial Pipeline to Darkside and determined that there is at least one additional payment of $ 4.4 million.

More importantly, analyzing the transactions can identify the bitcoin selling platforms that received the wallet’s ill-gotten funds.

“This information will provide important clues to law enforcement agencies to identify the perpetrators of these attacks,” wrote Elliptic researcher Tom Robinson.

Market regulators have put pressure on cryptocurrency exchanges. Many, such as Coinbase, now require users to reveal their identities before making any transactions. But other platforms don’t follow the same rules.

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

“In addition to narcotics, hacking tools and forged ID cards, Hydra also offers withdrawal services,” said Robinson.

Using cryptocurrency-related sites like Hydra, Darkside’s hackers have reportedly already resold some of the bitcoins they bought.

As the price of Bitcoin has skyrocketed in recent months, regulators are adjusting their strategies.

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

This story was posted through a news agency feed with no changes to the text. Only the heading was changed.

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