Everyone’s heard of crypto, right? Me too. But I had little idea what exactly it was or precisely how it worked. Andy Greenberg and his new book come to the rescue with a neat analysis of the seemingly anarchic yet perfectly traceable world of the blockchain.
When the infamous ransomware gang known as DarkSide attacked Colonial Pipeline in 2021, it requested a ransom payment, helpfully providing the firm with an address for a digital wallet to make the deposit.
Cybercriminals thought it was the safest way to get paid for their illicit deeds. Many indeed still think cryptocurrency, such as bitcoin, protects them from law enforcement because it allegedly is anonymous and close to impossible to trace.
Colonial paid DarkSide a fortune – around $4.4 million in cryptocurrency. Yet less than a month later, the US Justice Department managed to get about half of the ransom back. Untraceable? Surely not.
One could debate whether the story of how US law enforcement patiently worked towards the goal of tracing, identifying, and finally breaking down illegal drug markets using crypto won’t actually help criminals avoid similar mistakes in the future.
But the new book Tracers in the Dark: The Global Hunt for the Crime Lords of Cryptocurrency by Andy Greenberg, who is a technology journalist at Wired, is a great and educational read – a non-fiction techno-thriller of sorts.
The redheads of law enforcement
The book is especially relevant today, for the largest crypto industries, such as FTX, are falling like dominoes, according to some very influential economists. Binance, the industry's biggest player, seems stable for now, yet some call it an unregulated black box, lacking transparency.
Nouriel Roubini, who accurately predicted the 2008 global financial crisis, is claiming that these exchanges “will all implode into their scammy Ponzi cesspools.” He’s got worse words to describe the industry, though.
Obviously, it’d be too simple to say Greenberg’s book is about dumb crooks. Well, yes, it is, but it also tells the previously unexplored stories of how persistent geeks at law enforcement agencies around the world – but primarily in the United States – caught the scent of something fishy and successfully destroyed the myth of crypto as a safe haven for your money, be it legit or illegal.
And it’s not only the Federal Bureau of Investigation (FBI) we should be talking about. In fact, Greenberg is more eager to discuss the US Internal Revenue Service and its Criminal Investigation division, known as IRS-CI.
Sure, the FBI is regularly made into near superheroes in countless Hollywood movies, TV shows, and, yes, strategic press conferences. The IRS employees are often treated like accountants by peers from other law enforcement agencies, like “the redheaded stepchildren of law enforcement,” as one judge told Greenberg.
But it was the gunless, white-collared IRS-CI agents who followed the money and first asked the important questions about crypto – the supposedly anonymous digital cash and the blockchain.
For example, who would pay taxes on these anonymous transactions? Wouldn’t bitcoin or other digital currencies – one of the IRS agents called them “silly internet money” at first – become the perfect money-laundering tool?
They also saw a paradox: the blockchain boasted of anonymity yet also said it recorded every transaction in the entire crypto economy. Wasn’t this the precise opposite of anonymity? Wasn’t this a forensic accountant’s dream – a trail of numerous breadcrumbs?
Thriller-like stories of takedowns
Yes, it was. With the help of mathematicians, such as Sarah Meiklejohn at the University of California in San Diego, who had been focused on privacy research, agents saw a puzzle that could be solved.
The book is easy to read, but it’s not that simple if one wants to explain exactly how crypto transactions were traced, linked, and identified. Cybersecurity companies, where professionals distrust the crypto world, helped massively, too – and attracted many eager clients around the world.
Suffice to say, hard work paid off – after explaining the mechanics of the blockchain, Greenberg moves on to multiple tales of some of the most infamous dark web takedowns in recent history.
The stories are breathtaking. For many months, investigators tried to track the founder of the first Silk Road drug market and ended the operation with the arrest of Ross Ulbricht.
Alexandre Cazes, who was at the helm of AlphaBay, another drug bazaar, was also caught. It’s the stuff of thrillers where the culprits have to be arrested with their laptops open and with them logged onto their administrator accounts.
Finally, there’s an adventure of catching as many users as possible involved in the largest known child sex abuse site in history. Once again, the depraved men (yes, mostly men) thought their digital payments were untraceable.
The truth is cryptocurrency helps criminals conceal many crimes. Sure, many fans would resentfully contest this, but it’s not awfully wrong to claim that some of the unpleasant consequences of crypto is allowing people to buy illegal things on the web and enabling ransomware actors to get paid.
Actually, even the very fact that most people don’t understand crypto should be a massive red flag – you simply must know how it all works if you don’t want to be defrauded and lose money.
I suppose clients of FTX, who collectively lost more than $8 billion, were late to find out the answer. Did they know what they were getting into? Do they realize it’s virtually impossible to recoup the lost money because the FTX bankruptcy was literally paperless?
Much-needed regulation or a slippery slope?
Well, maybe not. What Greenberg is telling the world in his book is that decrypting the blockchain and getting at least some of the money back is feasible because it’s been done before.
The authorities are also finally moving forward with restrictions on financial privacy. Since the end of 2021, any cryptocurrency business doing a transaction worth more than $10,000 is required to report the Social Security number on the other side of the transaction to the IRS.
Some activists claim this is bad news for civil liberties and a massive expansion of a surveillance state.
But, again, the IRS-CI agents and other types of geeks have already shown that no money except small change in cash is truly private – so why the fuss about the much-needed regulation? Besides, nation-states, likeRussia or North Korea, are evading sanctions with precisely the help of crypto.
Greenberg quotes Matthew Green, a Johns Hokpins computer scientist and cryptographer, who said that from his first look at bitcoin back in 2011, he understood the blockchain is not at all anonymous.
“The privacy is not there,” he said. “You know like, you’re buying an ice cream cone, and then it turns out not to be an ice cream cone but the exact opposite of an ice cream cone? That’s how I think about bitcoin.”
There is potential for the slippery slope to start, though, according to the much-quoted Meiklejohn, the scientist. She is glad that the blockchain analysis helps trace dark web market deals, ransomware revenue, and crypto heists.
But there’s no reason it stops here. Dictatorships can abuse such services and start tracing the finances of protesters.
Another important factor is the fact that the ransomware problem is so huge that one cannot solve it by seizing a few million dollars out of the hundreds of millions flowing into cybercriminal wallets.
As one of the agents tells us in Greenberg’s book, many investigators simply avoid taking on ransomware cases because most of the key players are in Russia and remain untouchable. Resources are too expensive to waste them on a name-and-shame – and so the game continues.
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