Finance:Cryptocurrency tumbler

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Short description: Service that attempts to obscure cryptocurrency money trails

A cryptocurrency tumbler or cryptocurrency mixing service[1] is a service that mixes potentially identifiable or "tainted" cryptocurrency funds with others, so as to obscure the trail back to the fund's original source.[2] This is usually done by pooling together source funds from multiple inputs for a large and random period of time, and then spitting them back out to destination addresses. As all the funds are lumped together and then distributed at random times, it is very difficult to trace exact coins. Tumblers have arisen to improve the anonymity of cryptocurrencies, usually bitcoin (hence bitcoin mixer), since the digital currencies provide a public ledger of all transactions. Due to its goal of anonymity, tumblers have been used to money launder cryptocurrency.

Background

Tumblers take a percentage transaction fee of the total coins mixed to turn a profit, typically 1–3%.[3] Mixing helps protect privacy and can also be used for money laundering by mixing illegally obtained funds. Mixing large amounts of money may be illegal, being in violation of anti-structuring laws. Financial crimes author Jeffrey Robinson has suggested tumblers should be criminalized due to their potential use in illegal activities, specifically funding terrorism;[3] however, a report from the CTC suggests such use in terrorism-related activities is "relatively limited".[4] There has been at least one incident where an exchange has blacklisted "tainted" deposits descending from stolen bitcoins.[citation needed]

The existence of tumblers has made the anonymous use of darknet markets easier and the job of law enforcement harder.[5]

Peer-to-peer tumblers

Peer-to-peer tumblers act as a place of meeting for bitcoin users, instead of taking bitcoins for mixing. Users arrange mixing by themselves. This model solves the problem of stealing, as there is no middleman. When it is completely formed, the exchange of bitcoins between the participants begins. Apart from mixing server, none of the participants can know the connection between the incoming and outgoing addresses of coins.[6]

Privacy wallets

Another alternative to mixing services are "privacy wallets", allowing users to exchange bitcoin in an untraceable manner using so-called CoinJoin Bitcoin Mixer transactions. Since no central server is involved, this eliminates the problem of a mixing server stealing money or acting as a law enforcement honeypot. In recent years, criminals have increasingly moved from mixing services to privacy wallets.[citation needed]

Money laundering

In December 2013 cryptocurrency tumbler Bitcoin Fog[7] was used to launder a part of the 96,000 BTC from the robbery of Sheep Marketplace.[8]

In February 2015, a total of 7,170 Bitcoin was stolen from the Chinese exchange Bter.com and traced back to the same tumbler.[9]

In May 2019, FinCEN published a Guidance document that mentioned anonymizing services and mentioned particularly "tumblers". [10]

In February 2020, the alleged operator of a cryptocurrency tumbler was indicted on charges of "money laundering conspiracy, operating an unlicensed money transmitting business and conducting money transmission without a D.C. license."[11]

In April 2021, U.S. Federal authorities arrested the founder of Bitcoin Fog, a Russian-Swedish man named Roman Sterlingov, on charges of money laundering, operating an unlicensed money transmitting business, and money transmission without a license in the District of Columbia. It was alleged that during its 10 years of operation, Bitcoin Fog laundered over 1.2 million Bitcoin at a value of approximately $335 million.[12][13]

In 2022 the tumblers Blender.io and Tornado Cash were both sanctioned by the United States Department of the Treasury, making it illegal for US citizens, residents and companies to use the service.[14][15]

In March 2023, the tumbler ChipMixer and 46 million dollars in Bitcoin were seized.[16]

See also

References

  1. ↑ Jeffries, Adrianne (19 December 2013). "How to steal Bitcoin in three easy steps". https://www.theverge.com/2013/12/19/5183356/how-to-steal-bitcoin-in-three-easy-steps. 
  2. ↑ The Cryptocurrency Tumblers: Risks, Legality and Oversight. Law and Society: Private Law - Financial Law Journal. Social Science Research Network (SSRN). Accessed 6 December 2017.
  3. ↑ 3.0 3.1 Allison, Ian (February 11, 2015). "Bitcoin tumbler: The business of covering tracks in the world of cryptocurrency laundering". http://www.ibtimes.co.uk/bitcoin-tumbler-business-covering-tracks-world-cryptocurrency-laundering-1487480. 
  4. ↑ Brantly, Aaron (31 October 2014). "Financing Terror Bit by Bit". https://www.ctc.usma.edu/posts/financing-terror-bit-by-bit. 
  5. ↑ IHS Jane's Intelligence Review (30 December 2014). "Law enforcement struggles to control darknet". http://www.janes.com/article/47455/law-enforcement-struggles-to-control-darknet. 
  6. ↑ See, Kenneth (2023). "The Satoshi laundromat: a review on the money laundering open door of Bitcoin mixers". Journal of Financial Crime. doi:10.1108/JFC-11-2022-0269. 
  7. ↑ Greenberg, Andy. "Bitcoin Fog". Wired. https://www.wired.com/story/bitcoin-fog-dark-web-cryptocurrency-arrest/. 
  8. ↑ Edwards, Jim (4 Dec 2013). "A Thief Is Attempting To Hide $US100 Million In Stolen Bitcoins -- And You Can Watch It Live Right Now". http://www.businessinsider.com.au/a-thief-is-attempting-to-hide-100-million-in-stolen-bitcoins-and-you-can-watch-it-live-right-now-2013-12. 
  9. ↑ Ghoshal, Abhimanyu (12 March 2015). "Chinese Bitcoin exchange Bter will pay back users after losing $1.75 million in cyberattack". The Next Web. https://thenextweb.com/insider/2015/03/12/chinese-bitcoin-exchange-bter-will-pay-back-users-after-losing-1-75-million-in-cyberattack/. 
  10. ↑ Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies
  11. ↑ "Ohio Resident Charged with Operating Darknet-Based Bitcoin "Mixer," which Laundered Over $300 Million" (in en). 2020-02-13. https://www.justice.gov/opa/pr/ohio-resident-charged-operating-darknet-based-bitcoin-mixer-which-laundered-over-300-million. 
  12. ↑ Lyons, Kim (2021-04-29). "Feds arrest founder of bitcoin 'mixer' they say laundered $335 million over ten years" (in en). https://www.theverge.com/2021/4/29/22409501/feds-arrest-founder-bitcoin-mixer-laundered-cryptocurrency. 
  13. ↑ "Individual Arrested and Charged with Operating Notorious Darknet Cryptocurrency "Mixer"" (in en). 2021-04-28. https://www.justice.gov/opa/pr/individual-arrested-and-charged-operating-notorious-darknet-cryptocurrency-mixer. 
  14. ↑ Clark, Mitchell (2022-05-06). "US punishes Blender.io for helping North Korea launder millions in stolen Axie crypto" (in en). https://www.theverge.com/2022/5/6/23060544/us-treasury-blender-io-sanctions-bitcoin-mixer. 
  15. ↑ Faife, Corin (2022-08-08). "US Treasury bans Tornado Cash mixer for role in crypto money laundering" (in en). https://www.theverge.com/2022/8/8/23296778/us-treasury-tornado-cash-crypto-mixer-sanctions-ethereum-north-korea. 
  16. ↑ Coote, Darryl (16 March 2023). "Int'l operation takes down ChipMixer money laundering service". UPI News. https://www.msn.com/en-us/money/other/intl-operation-takes-down-chipmixer-money-laundering-service/ar-AA18HnDt. 



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