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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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Indian Government Think Tank Trials Blockchain to Combat Fake Meds

An Indian government think tank is working on a blockchain solution aimed to combat the country’s roaring counterfeit drugs trade.

The National Institution for Transforming India, known as NITI Aayog, aims to have a proof-of-concept (PoC) of the solution completed by the end of 2018 and begin rolling it out next year, according to local news source Factor Daily,

An anonymous NITI Aayog official was cited as saying:

“We are all taking those [fake] medicines and I am sure people are dying. One way to reduce that is put the entire supply chain on the blockchain.”

According to a World Health Organisation (WHO) report, India produces 35 percent of counterfeit drugs that are sold globally. Furthermore, the Associated Chambers of Commerce and Industry of India (Assocham), states that around “60-70 percent of dietary supplements being sold across India are fake, counterfeit, unregistered and unapproved.”

NITI Aayog hopes to counter this state of affairs by generating a unique ID number for each medicine, which will be tracked through the supply chain on a blockchain, the official explained. With the system, a consumer or business can access the history and source of the drug by scanning a QR code or barcode on the medicine.

The project has reportedly got the green light from the country’s pharmaceutical industry, despite some cost concerns.

Dilip G. Shah, secretary general of the Indian Pharmaceutical Alliance, a lobby group, said:

“Fake drugs are a concern and, if blockchain can help the industry get rid of the problem, we are up for it.”

The project is also in line with the Indian governments’ vision to explore blockchain technology “for ushering in [a] digital economy,” as stated by the country’s finance minister Arun Jaitley during his budget speech in February.

NITI Aayog also stated earlier this year that it is developing other proofs-of-concept to explore blockchain tech in sectors including education, health and agriculture.

Rupee and drugs image via Shutterstock

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Crypto vs. Cash – How the Numbers Stack Up on Drugs, Guns, Murders

In a Reddit AMA, technology visionary Bill Gates lost a lot of fans when he gave his opinion on Bitcoin, honing in on a pretty weak argument for its use. It’s “used for buying fentanyl and other drugs, so it is a rare technology that has caused deaths in a fairly direct way,” Gates expressed.

But, Bill, drugs have been around for much longer than Bitcoin has, and people have been buying them for centuries, so how ever did they manage before this digital currency came along?

Blaming a tool for its unintended use is quite foolish. Yes, drugs can be bought with Bitcoin, as can life-saving medical procedures. You see, this digital currency is just that, a currency, like US Dollars, Nigerian Naira, Thai Baht and Russian Ruble, all which are equally adept at buying drugs.

Harping back

There was a time where because of circumstances, Bitcoin was used often for buying of illegal substances, from drugs to guns and even hitmen. This all resulted from dark web marketplaces such as the infamous Silk Road.

Bitcoin was the currency choice on the Dark web, as it had many attributes that suited this shady underworld. It was decentralized, anonymous and digital. Bitcoin was thus the only way people could buy these illegal substances – on this marketplace.

Bitcoin was still quite unknown, and a very small fish in terms of its market cap and in comparison to any other currency, asset or market. But during this period, its primary use was probably for illegal activities.

But, as Bitcoin has organically grown and been adopted into more mainstream markets, the use of the digital currency as a Darknet staple has been declining. There is empirical evidence that Bitcoin, itself, is falling out of favor as a currency on the darknet, but statistically, mainstream adoption means less “criminals” are holding and spending Bitcoin.

What the numbers say

In a recent paper published in January this year at the University of Sydney Business School, some numbers were quantified when it comes to Bitcoin buying and illegal activities.

“We find that illegal activity accounts for a substantial proportion of the users and trading activity

in Bitcoin,” the paper reads. “For example, approximately one-quarter of all users, 25 percent, and close to one-half of Bitcoin transactions, 44 percent, are associated with illegal activity.”

“Furthermore, approximately one-fifth, 20 percent, of the total dollar value of transactions and approximately one-half of Bitcoin holdings, 51 percent, through time are associated with illegal activity.”

“These users annually conduct around 36 mln transactions, with a value of around $72 bln, and collectively hold around $8 bln worth of Bitcoin.”

Looking at these numbers, currently, there are almost 28.5 mln Bitcoin wallets that hold more than 0.001 BTC according to data compiled by

However, most Bitcoin users have several wallets and use multiple wallet addresses to increase their financial privacy when transacting. Hence, the number of users is likely less than that number.

But to counter that, there will be a lot of inactive wallets, and a number of other factors that shift this number around. Therefore, it really comes down to an estimate, and hence, around 20 mln Bitcoin users globally can be considered as a fair estimate.

So, the numbers stand at five million users of Bitcoin have bought illegal goods with it. And 10 million illegal transactions happen annually. Additionally, just over half of the Bitcoin in circulation has been used for illegal activities.

These are big numbers, but when it comes to comparisons to other payment options, it starts to shine a light on just how small the Bitcoin drug trade is.

What about guns and murder?

Part of the fear that whirls around Bitcoin is that it was not only used for buying drugs but, especially when it came to the Silk Road, it was apparently a tool for purchasing weapons as well as hitmen.

However, the truth of the matter is that while guns could be purchased on the Silk Road, and with Bitcoin, they account for a very small portion of sales.

Nicolas Christin, assistant research professor of electrical and computer engineering at Carnegie Mellon University, is one of the researchers behind a recent deep-dive analysis of sales on 35 marketplaces from 2013 to early 2015.

He states:

“Weapons represent a very small portion of the overall trade on anonymous marketplaces.There is some trade, but it is pretty much negligible.”

Drugs are far more common. Specifically, MDMA and marijuana each account for about 25 percent of sales on the dark web, according to Christin’s research. But weapons are so uncommon that they were lumped into the “miscellaneous” category, along with drug paraphernalia, electronics, tobacco, Viagra, and steroids. Together those account for maybe three percent of sales.


Image source:

In comparison, albeit legal, gun purchases in the US alone account for a huge number of data with regards to background checks shows.

The figures show that there were 16,808,538 applications for gun licenses in 2012. If they were approved, that would be enough weapons to stock a member of NATO’s armed forces nearly five times over.

Traces of cocaine

To straightaway put this into context, the report from Sydney reads that half of Bitcoin has at some stage been used for illegal purchases. Then, a report conducted just on US Dollars, and relating just to cocaine, says that 90 percent of bills hold traces of the white powder.

In the same paper, which outlined the numbers for Bitcoin drug buying, another report is cited from the US White House Office of National Drug Control Policy that estimates the drug users in the United States, in 2010, spent around $100 bln annually on illicit drugs.

So in contrast, the initial report outlines that annually: “36 mln transactions, with a value of around $72 Billion” occur with Bitcoin, meaning that 44 percent of $72 bln – $31.6 bln – is spent annually, globally, on drugs.

Yet, in the US alone, in 2010, $100 bln was spent on drugs.

The vast majority of drug users still purchase illicit substances via more ‘traditional’ methods. According to a 2017 Global Drug Survey, regardless of country, less than half of drug users purchase substances via the dark web in any one country. The global median for a percentage of drug users who use the darknet is 10.1 percent.

2017: Have you obtained drugs from darknet markets in the last 12 month?

Image source:

No special guilt

The fact of the matter is Bitcoin is used for illegal activities and substances, but there should be no special guilt attached to it. It is a tool of the internet, and with online purchases, across all sectors, growing, it is unsurprising that this currency that only exists online comes into play.

Online payments are constantly growing as more and more people turn away from cash, with Sweden, the leader in becoming a cashless society. These online payments give the opportunity to people to buy goods and services online.

But, because credit and debit card purchases online for drugs and illegal goods are not possible, or certainly not smart, people look for other opportunities. The ease and convenience of buying online extends to the illegal markets, and just because there is a tool to do it with, doesn’t mean that the tool is the enemy.

Drugs are the enemy, and while they continue to exist, so will means to purchase them. Still, though, cash is king when it comes to drug purchasing, yet, there are no calls to ban the USD despite $100 bln worth contributing to the drug epidemic.

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Crypto Exchange Creating Wallet Blacklist to Fight Fentanyl Crisis

A Canada-based cryptocurrency exchange wants to coordinate with other startups around the world to help fight the international fentanyl epidemic.

Einstein, based in Vancouver, is trying to obtain lists of wallet addresses associated with fentanyl arrests and indictments, said Christine Duhaime, the firm’s chief anti-money-laundering officer.

In parallel, the firm is also pursuing partnerships with other exchanges, starting in its home country and in the U.S., “to build a global database of bad wallet holders,” said Duhaime, who also runs an eponymous law firm and is the founder of the Digital Finance Institute, a think tank.

The goal is for Einstein and other exchanges to prevent their customers from sending cryptocurrency to these wallets from their exchange accounts, Duhaime told a suit-and-tied crowd of 200 at the Blockchain for Business and Government conference in Toronto, Monday.

While cryptocurrency ranks at the bottom among ways fentanyl is paid for – bank wires and traditional money transmitters are more commonly used – Duhaime framed Einstein’s efforts to combat the drug as philanthropic.

She told attendees:

“We would do a blacklist of wallets as our giveback [to society].”

Local impact

Still, there’s good reason for a Canadian exchange, one of the few serving the market actively, to seek to break ground on such an effort.

Fentanyl is a synthetic drug that’s 50 times stronger than heroin and was responsible for a reported 66 percent of overdose-related deaths in the U.S. in 2016. But Vancouver is the “ground zero” of the problem, Duhaime said, with fentanyl accounting for nearly all the Canadian city’s 922 drug overdose deaths that year.

She related a story of the teenage daughter of the head of AML compliance at a global bank who died from taking fentanyl at a graduation party. Even first responders have died from accidentally touching the stuff.

If successful, Einstein’s effort could conceivably help the cryptocurrency space overcome its lingering public image as a hive of criminality. However, the strategy may not sit well with long-time crypto users who value their privacy highly and worry about the effect blacklists have on the fungibility of bitcoin and other tokens.

A more immediate obstacle, Duhaime told CoinDesk, is that law enforcement in Canada has been reluctant to provide Einstein with wallet addresses tied to fentanyl cases, out of concern that doing so would violate privacy laws.

In response, she said, she has argued that not even bank account numbers are considered identifying information under Canadian law, and noted that wallet addresses are public. The agencies are reconsidering, she said.

Team effort

Einstein already has a blacklist of addresses associated with ransomware, but it was able to put that one together on its own. That’s because ransomware victims who were Einstein customers came to the company with the information, Duhaime said.

The fentanyl effort, by contrast, will require law enforcement’s help.

While acknowledging that criminals have ways to hide their tracks on the blockchain, she told CoinDesk that fentanyl users are likely “not as sophisticated” as other bad actors and less apt to change wallets or tumble their coins.

In an earlier presentation at the conference, Michael Gokturk, Einstein’s CEO, acknowledged the irony of trying to position his company as a model of compliance in a market whose very creation was an act of rebellion.

He said:

“Cryptocurrencies need government regulation to deter price manipulation and related wrongs, but the absence of of such regulation is one of the biggest reasons that investors buy into cryptocurrencies in the first place.”

Possibly compounding the challenge, Einstein, founded about a year ago, is currently a pipsqueak among exchanges, which might limit its clout in persuading potential partners to join the effort.

Gokturk said Einstein is currently handling $20 million to $30 million in daily volume (in USD), which would put it at the low end of the top 50 tracked by CoinMarketCap.

By comparison, Coinbase’s GDAX, which ranks 12th, does about $240 million daily.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.

Opioids image via Shutterstock

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ICE Exploiting Blockchain to Expose Crypto Use in Drug Trafficking

The U.S. Immigration and Customs Enforcement (ICE) has detailed how it is working to expose transactions made by illegal drug traffickers using cryptocurrencies to cover their trail.

In a written testimony to a Senate committee on Jan. 25, ICE’s deputy assistant director Greg Nevano said the agency has seen increasing usage of cryptocurrencies to pay for the trafficking of illicit drug such as opioids like fentanyl.

Combatting this growing concern, the agency said it has adopted various strategies to expose drug traders who are turning to cryptocurrencies for their difficulty to trace.

Nevano wrote in his testimony:

“In support of its diverse financial investigative efforts ICE uses undercover techniques to infiltrate and exploit peer-to-peer cryptocurrency exchangers who typically launder proceeds for criminal networks engaged in or supporting dark net marketplaces.”

In addition, Nevano also indicated that ICE is employing “complex blockchain technology exploitation tools” in a bid to analyze cryptocurrency transactions and to discover the identities behind those transactions. Further, training is being provided by the agency to national and international cryptocurrency investigators to continue tackling the issue.

While he did not disclose the precise details of the agency’s cryptocurrency investigations, the comments mark ICE’s latest effort in delving into cryptocurrency’s underlying blockchain technology in order to strip its core feature of anonymity.

As reported by CoinDesk previously, in another testimony to a Senate committee, ICE reported its concern that criminal organizations have been increasingly using cryptocurrencies to launder money or pay for illicit activities.

ICE image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at

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Crypto Corrupts the Youth? South Korea Prime Minister Says So

South Korea’s prime minister is reportedly raising alarms about cryptocurrency’s influence on young people as regulators draw up rules for the country’s exchanges.

“There are cases in which young Koreans including students are jumping in to make quick money and virtual currencies are used in illegal activities like drug dealing or multi-level marketing for frauds,” Prime Minister Lee Nak-yeon said in a statement translated from Korean by CNBC.

He added:

“This can lead to serious distortion or social pathological phenomena, if left unaddressed.”

Accordingly, the South Korean leader called on government agencies such as the Ministry of Justice to look into the matter, CNBC reported.

Separately, the Financial Services Commission (FSC) is putting the finishing touches on proposed regulations for South Korea’s exchanges, the Hankyoreh newspaper reported.

“Cryptocurrency exchanges will be required to maintain standards for consumer protection, such as having separate deposits for customers’ assets, and for increasing transparency, such as having a procedure for confirming customers’ identity,” the publication quoted an unnamed official as saying. “The authorities will also be empowered to prosecute exchanges that break these rules.”

Crypto hotspot

These shots across the bow come as South Korea has emerged as a hub of trading activity in bitcoin and other crypto assets. The country is home to two of the top 10 bitcoin exchanges by volume, according to CoinMarketCap.

South Korean exchanges were the first places where the bitcoin price reached $10,000 in this week’s run-up. During the third quarter, the South Korean Won passed the U.S. dollar as ether’s top trade pair, according to CoinDesk’s latest quarterly State of Blockchain Report.

But South Korean regulators have already taken stern measures in the crypto asset market. In September, the FSC banned domestic initial coin offerings and declared violators would be dealt with in a Virtual Currency Detention Center.

Photo of Prime Minister Lee Nak-yeon via Shutterstock.

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at

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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.”