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FBI Has 130 Ongoing Crypto Cases, a ‘Small Sliver’ of All Investigations, Agent Says

FBI agent Kyle Armstrong said the Bureau has 130 ongoing crypto-related cases, with dark web drug sales a particular concern, Bloomberg reported Wednesday, June 27.

Speaking at the Crypto Evolved conference in New York on Wednesday, the supervisory special agent said the number represented “a small sliver,” of the FBI’s activities, which number “thousands of cases.” The agency has nonetheless noticed an increase in illegal activity facilitated by cryptocurrency payments, he said.

The 130 “threat tagged” files related to crypto span a gamut of crimes, including human trafficking, kidnapping, ransomware attacks and illicit drug sales.

This latter has become a focus for the Bureau, according to Armstrong, highlighting the opioid epidemic in the U.S. He considered the dark web to be a factor in enabling drug abuse, saying that 10 percent of global drug users make their purchases on illegal online marketplaces.

Armstrong’s figure of 10 percent is notably not higher than statistics released by an older Global Drug Survey from 2017, which found the global median for the percentage of drug users who use the darknet to be 10.1 percent. 90 percent then, continue to purchase illicit substances via more ‘traditional’ methods.

Armstrong, who manages the three-year-old Virtual Currency Initiative for the FBI as it relates to money laundering activities, said that while the underlying blockchain technology makes it easier for investigators to trace cryptocurrencies than cash, the relative anonymity of transactions can prove an obstacle.

In February, a two-year study of the dark web ecosystem claimed that Bitcoin may in fact be losing its cachet as the most popular currency on dark web markets, seemingly due to consumers’ annoyance at network traffic and high transaction fees.

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US Prosecutors Seize $17 Mln in BTC, Seek 4,000 BTC More for Dark Web Dealings

U.S. law enforcement has seized $17 mln in Bitcoin (BTC) and other cryptocurrencies, and is seeking to seize about $24 mln more, from two Maryland, USA men, on charges of selling counterfeit drugs on the dark web, according to a Department of Justice (DoJ) press release published yesterday, June 26.

In addition to around $17 million in Bitcoin and other cryptocurrencies, Law enforcement has seized $2.5 million in computer equipment, and over $1.5 million in cash. The government is further seeking to forfeit “no less than” $5.67 million, plus the value of 4,000 BTC (about $24 mln at press time), believed to be the proceeds of the illegal drug sales.

The six-count indictment –– unsealed June 22 –– alleges that from Nov. 2013 through June 2017, Ryan Farace, 34, sold fake “Xanax” pills on the dark web in exchange for Bitcoin. Together with Robert Swain, also 34, he is further charged with laundering the proceeds through means “designed to conceal the source and ownership of the illegal funds.”

Farace now faces a maximum sentence of five years in prison on drug distribution counts, with both men facing a maximum of 20 years’ imprisonment on money laundering charges. 

In February, a two-year study of the dark web ecosystem claimed that Bitcoin may be losing its cachet as the number one currency on darknet markets, seemingly due to users’ frustrations with network traffic and transaction fees.

In March, Cointelegraph reported on a case in Ohio, in which federal prosecutors sought the forfeiture of over 500 Bitcoin (then worth about about $5.5 mln, now worth about $3 mln) seized during the investigation of a group allegedly producing fake identity documents. The US Marshals Service has periodically held auctions for seized crypto assets, selling 3,813 bitcoins (about $22.8 mln today) in January of this year.

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World Famous Brothel Buying Into Bitcoin?

The Bunny Ranch, which is well known for even those who do not frequent such places thanks to being featured on HBO’s Cathouse show, is mulling over the advantages that could come with offering a Bitcoin payment option.

Bitcoin made its name on the dark web because of the anonymity, and other reasons, it brought to the user, helping them buy anything from drugs and weapons, as well as sex and porn, discreetly.

Things could be going full circle now as the upmarket brothel sees an advantage in harnessing that same privacy in payment.

Exploring the recesses of Bitcoin

Owner Dennis Hof, who has seven such legal establishments across Nevada, says he is exploring Bitcoin as a payment option due to demands being made by their high-end clients.

“We have some of the richest men in the world coming in and out of my brothels. Our high dollar clientele is accustomed to getting anything they want here, so when I started hearing requests from them to look into accepting Bitcoin, I took those suggestions very seriously.”

Bitcoin has created a new breed of the wealthy elite, but it has also become a plaything of those already well endowed in the bank account. Thus, it is not surprising that clientele of the Bunny Ranch have their fingers in the cryptocurrency pie.

The adoption of such cryptocurrencies has spread far and wide, but it is more than just a payment system for such clients, it is a secretive one.

“Friends of mine like Heidi (Fleiss, Hollywood’s most notorious madam) have been trusted with a lot of powerful secrets, and the anonymous nature of Bitcoin is a natural fit for people who have much to lose if their private matters were to ever fall into the wrong hands,” Hof added.

It would also, according to Hof, cut down on the duffel bags of money that are brought to his door, posing a security risk.

Full circle of adoption?

Bitcoin had a lot of things going for it when it was the tool of the dark web for payments. The anonymity, the global transfers, the speed and cheapness of it all – back then.

It was used to buy all sorts of things from the shady underbelly of the Internet, but now, as it has stepped into the light, its image has changed. More a tool of the Wall Street investor than the illicit arms dealer, Bitcoin has evolved.

However, the aspects that made it a success in a secretive world still remain. And, it is because of this, that it looks like it is doing somewhat of a full circle, again being thought of as a tool for paying for sex.

Of course, this is a new era and a much less seedy situation, but the way in which Bitcoin moves, it is showing its versatility to corner and re-corner, all parts of the market.

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Bitcoin in Center of Dark Web Drug Dealing Case in Holland

Accused of laundering hundreds of thousands of euros through the digital currency Bitcoin, six men are facing charges in a Dutch court for apparently selling Bitcoin paid for by illegal drug sales.

The men face potential sentences ranging from six to 36 months for crimes relating both to drug possession, as well as money laundering.

There has been a crackdown on Bitcoin-related crimes as criminals continue to try and use it as a means to enact illegal and anonymous payments.

Trading dirty Bitcoin

The suspects allegedly met with Bitcoin traders in places with public access to wifi, swapping their ill-gotten online currency acquired on the Darknet for hard cash.

The Bitcoin traders “as opposed to normal currency exchange shops, did not ask for identification papers nor about the origin of the Bitcoins,” prosecutors said in a statement.

Denying the charges

All six of the men, while appearing in front of the court, one by one denied the charges insisting they had acquired their Bitcoin haul legally.

“My client is accused of having sold more than 460,000 euros in Bitcoin which he supposedly earned through drug trafficking,” one lawyer Marielle van Essen told judges.

“We complete refute it,” she said.

“I had a job, a good salary and no rent to pay. I acquired Bitcoins in a completely legal way,” said her client, identified only as Mr. Bischop.

Where did the Bitcoin come from?

The issue and attraction of Bitcoin is that it does not leave much of a paper trail and helps people remain anonymous in their transactions.

Prosecutors, however, said the defense “was unable to explain the origins of the astronomical sum of money” earned by the accused, stressing that money-laundering posed “a serious threat to our society.”

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Jeff Sessions Says Dark Web Use with Bitcoin is ‘Big Problem’

US president Donald Trump’s Attorney General Jeff Sessions has called the Dark Web a “big problem” and hinted at potential future regulatory moves.

As part of a testimony at the Senate Judiciary Committee on Justice Department oversight, Sessions responded to a query from California senior senator Dianne Feinstein, who raised the issue of Dark Web crime.

“It seems to me that the problem of the Dark Web being used by criminals is going to grow in the coming years,” Feinstein stated.

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Sessions responded that the phenomenon was “worrying” law enforcement.

“We’re very concerned about that, the FBI is very concerned about that,” he said.

Discussing AlphaBay, the Dark Web portal the US took down in July, Sessions added that users were “using Bitcoins and other untraceable financial capabilities.”

“It is a big problem,” he concluded.

The two politicians’ mutual headache over the Dark Web hints at a possible focus for future maneuvers on digital privacy.

While the testimony was somewhat erroneously reported by other media resources as anti-Bitcoin, Sessions nonetheless only suggested by association that Bitcoin’s anonymity served criminals’ objectives.

Such a perspective is outdated, however, as trends suggest Dark Web users have abandoned Bitcoin in favor of privacy-centric altcoins such as Monero long ago.

A broader understanding of Bitcoin is still the topic of debate for US lawmakers more generally, with the situation on the ground for users meanwhile remaining shaky.

This week, popular exchange Bitfinex announced it would withdraw from the US market completely by Nov. 9 due to regulatory barriers

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Jamaican Police Take Aim at Human Traffickers’ Bitcoin Pockets

As part of their strategy to attack the scourge of human trafficking, the Jamaican police are refining their activities to strike at those criminal who are seeking haven in Bitcoin and digital payments.

More and more human trafficking perpetrators are switching to digital currencies to help them burrow underground and receive payment for their illicit activities, but the police in Jamaica are on to them.

Big business in Jamaica

Unfortunately, the human traffic and sex slavery market is far larger than it should be, estimated to be worth around $150 bln. In Jamaica, it is estimated that there are 7,000 women, children and men living in slavery, with their handlers charging anywhere from $2 to $470 for their services.

The announcement of the crackdown came at two-day Anti-Money laundering/Counter-Financing of Terrorism Conference in New Kingston where law enforcement urged traditional banks to collaborate with the police in efforts to track the money trail that is making its way into the formal money system.

Bitcoin transactions

The police also noted the new challenges that were emerging in the form of digital currencies as these criminals burrow underground to use seemingly anonymous coins like Bitcoin and others.

There has been noticeable movement towards cryptocurrencies for criminals, including human traffickers. Their business transactions are kept away from the banks making the money trail much harder to follow. Additionally, these transactions are happening on the dark web.

“They are asking for payment in Bitcoin and other cryptocurrencies, a new factor which creates problems for law enforcers,” said Deputy Superintendent of Police Carl Berry.

Typically, Bitcoin transactions mask the identity of persons trading the cryptocurrency. But Berry said the Jamaica Constabulary Force has: “crafted a plan to treat with the flow of illicit money. We will hit them in the pocketbook.”

Progress made

Despite the high numbers estimated to be sold into modern slavery in Jamaica, the Island nation recently managed to get itself off an international watch list for human trafficking after securing four convictions and rescuing more than 70 victims.

But Berry cautioned that there was a lot more work to do.

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Europol: Zcash, Monero and Ethereum Follow Bitcoin in Cybercrime

Europol, the law enforcement agency of the European Union (EU), has warned that the virtual currencies Zcash, Monero, and Ethereum are increasingly being used in the digital underground market. The agency, however, reiterated that the leading cryptocurrency Bitcoin is still the preferred currency in cybercrime.

In its 2017 Internet Organised Crime Threat Assessment (IOCTA) report, Europol stated that the darknet landscape is rapidly evolving. The agency concluded that Monero is fast gaining darkweb popularity because of its “additional security and privacy features” making it one of the easy cryptocurrency choices for criminals.

Part of the report reads:

“Cryptocurrencies continue to be exploited by cybercriminals, with Bitcoin being the currency of choice in criminal markets, and as payment for cyber-related extor on a empts, such as from ransomware or a DDoS attack. However, other cryptocurrencies such as Monero, Ethereum and Zcash are gaining popularity within the digital underground”.

The report further detailed the main reason why cryptocurrencies are becoming a favorite among criminals:

“Transactions cannot be attributed to any particular user/address, all coins used in a transaction are ‘hidden’ by default, and transaction histories are kept private.”

Other highlights of the IOCTA report

In its report, Interpol focuses on the popularity of digital currencies on darknet marketplaces. As an example, it cites the case of a Monero-focused ransomware called Kirk that was launched in early 2017.

In the case of Ethereum, the report claimed that smart contracts based on the cryptocurrency could be utilized to legalize payments between crime service providers. It also presented a case of a proposed decentralized darknet market that is designed to operate on the Ethereum Blockchain.

Meanwhile, the document clarified that Zcash is yet to be the subject of a law enforcement investigation. However, the virtual currency is reportedly being eyed by darknet marketplaces due to its privacy features, which hide both the transaction recipient and the transaction amount.

The case of AlphaBay

The biggest darknet market AlphaBay was shuttered by Europol in early 2017. The closure was part of a globally coordinated crackdown on underground markets. However, prior to its shutdown,  AlphaBay had already added Ethereum and Monero as payment options, and previously had plans to include Zcash.

While any currency can be associated with any criminal activities, such security issues with cryptocurrencies provide an easy excuse for governing bodies to continually be skeptical about the possible value and security of digital currencies.