Revisiting history: how Bitcoin helped take down the largest child porn website

Bitcoin (BTC) has helped solve multiple crimes that would be extremely difficult to address if criminals used legal money in the form of cash.

Meanwhile, politicians, regulators, and law enforcement put their focus elsewhere, often complaining that cryptocurrencies facilitate crime and, therefore, intensify crackdowns on privacy-preserving solutions.

In this article, we remind you of a prominent story from five years ago about how BTC helped take down "the largest darknet child pornography website," Welcome To Video (WTV).

At the beginning of Bitcoin's story, which started at the intersection of 2008 and 2009, there was a widespread belief that this first cryptocurrency was anonymous. This belief remains somewhat popular but is increasingly less true, given that most BTC users now utilize platforms requiring identity checks. This is a significant point where a user, whether a criminal or a regular citizen, can be traced.

And this is exactly what happened in the WTV case.

The background is this.

In October 2019, the U.S. Department of Justice (DoJ) announced a highly successful international operation that took down the global child pornography website WTV.

The operation resulted in the arrest of 337 individuals in 38 countries and the rescue of at least 23 minor victims who were being abused by the site's users.

Multiple agencies from the U.S., United Kingdom, South Korea, and Germany cooperated in this operation.

What was the role of BTC in all of this?

Welcome To Video was selling its videos for Bitcoin. According to the DoJ, the website had over one million Bitcoin addresses.

However, this doesn't mean it had a million users, as one person or organization can have an essentially unlimited number of BTC addresses.

In the Complaint for Forfeiture, the U.S. Attorney for the District of Columbia claimed that in the three years leading up to March 2018, Welcome To Video received at least 7,300 transactions worth 420 BTC, or more than $370,000 at the time (equivalent to around $29 million today).

So, how did BTC, which initially helped WTV, later become the death sentence for this terrible website?

Following BTC

The DoJ explains that this was achieved through the sophisticated tracing of BTC transactions.

Investigators followed the funds on the Bitcoin blockchain, which is essentially a decentralized, public database where everyone can see and follow transactions.

The more challenging part is tying a specific transaction to an individual. However, as has been proven on multiple occasions, it is possible.

How? Let’s explore the WTV case.

One of the main players in this international operation was the U.S.-based blockchain analysis company Chainalysis, specifically its tracing software tool Reactor.

This tool not only allowed tracking BTC transactions until the cryptocurrency reached a point where the user could be identified but also helped cluster addresses and tie them to a specific individual or organization.

In this case, there were a few “identification points” as three crypto exchanges were identified as platforms used by WTV’s “clients” to buy BTC and send it to WTV.

According to Chainalysis, this allowed investigators from the Internal Revenue Service-Criminal Investigations (IRS-CI) to request exchanges to provide copies of identification, addresses, and other relevant transactions associated with those suspicious accounts.

In some cases, IRS-CI successfully identified WTV users by combining account information with open-source intelligence and other investigative techniques, such as transacting with a suspect.

As mentioned in the Complaint for Forfeiture, an undercover agent paid Welcome To Video in Bitcoin and used the website to download child pornography video files while in Washington, D.C.

WTV users were often careless about hiding their tracks, which made the investigation much easier – one user even exposed their own home IP address.

These techniques allowed agents not only to track WTV users but also to identify the content they downloaded or uploaded.

As some investigators later admitted, this would not have been possible without Bitcoin. But the WTV case is not an isolated incident.

For example, in 2020, Dutch and U.S. authorities took down the DarkScandals website, which hosted rape videos and child abuse material.

According to a report by The International Centre for Missing & Exploited Children, payments to DarkScandals were sent from eight crypto exchanges.

Whack-a-mole and privacy

A few years ago, the Association of Certified Financial Crime Specialists shared several ways to detect human trafficking through bank and crypto exchange transactions.

These indicators include frequent purchases in small amounts of BTC and other cryptocurrencies, engaging in transactions at night, making payments to sites associated with the adult industry, and making large or frequent purchases related to food, motel/hotel rooms, movies and entertainment, vehicle rentals, phones, advertisements, and online classified websites.

However, while these clues may indicate suspicious activity, they do not provide conclusive proof.

For example, many Bitcoin users employ a dollar-cost-averaging strategy, regularly buying small amounts of BTC regardless of the price.

This type of BTC transaction tracking has also raised legal questions, as demonstrated in the case United States v. Gratkowski.

Richard Nikolai Gratkowski, who was charged with accessing child pornography with the intent to view, argued that the agents tracking his BTC payments violated his right to privacy.

However, the court ruled that "there is no intrusion into a constitutionally protected area because there is no constitutional privacy interest in the information on the blockchain."

Since the WTV takedown, not only have crypto exchanges become more stringent in requiring user identification, but the BTC and crypto industry has also developed additional tools to help users increase their privacy.

These include expanding so-called privacy coins, such as monero (XMR), and "mixers," or special platforms that obscure BTC and crypto transaction history.

However, regulators are intensifying their crackdown on such privacy-preserving services, leading to a whack-a-mole scenario where developers continually find workarounds to new regulatory measures.

Additionally, increasing BTC privacy is a top priority for Bitcoin developers. It is considered crucial for Bitcoin to become a censorship-resistant network that protects its users from criminals and power abuse by authorities.

With all that said, criminals are also becoming more adept at hiding their financial tracks. This presents new challenges for those trying to balance preserving legitimate individuals' financial privacy and fighting crime.

Therefore, it is currently impossible to predict how private BTC will become, given the ongoing struggle between developers and authorities, with the latter constantly seeking more control over citizens' data.