Feds Arrest an Alleged $336M Bitcoin-Laundering Kingpin
wired.com
wired.com
> Most remarkable, however, is the IRS's account of tracking down Sterlingov using the very same sort of blockchain analysis that his own service was meant to defeat. The complaint outlines how Sterlingov allegedly paid for the server hosting of Bitcoin Fog at one point in 2011 using the now-defunct digital currency Liberty Reserve. It goes on to show the blockchain evidence that identifies Sterlingov's purchase of that Liberty Reserve currency with bitcoins: He first exchanged euros for the bitcoins on the early cryptocurrency exchange Mt. Gox, then moved those bitcoins through several subsequent addresses, and finally traded them on another currency exchange for the Liberty Reserve funds he'd use to set up Bitcoin Fog's domain.
> Based on tracing those financial transactions, the IRS says, it then identified Mt. Gox accounts that used Sterlingov's home address and phone number, and even a Google account that included a Russian-language document on its Google Drive offering instructions for how to obscure Bitcoin payments. That document described exactly the steps Sterlingov allegedly took to buy the Liberty Reserve funds he'd used.
Who knows what other parallel constructions efforts or tips offs may have come into play. But data leaks from hacked / defunct exchanges being traced over such a long timeline is surprising.
This person is accused of transmitting money without a license. It's the same charge that would be brought if you were hosting a custodial wallet that permits deposits and withdrawals, and didn't have a money transmitter license and comply with the regulations that apply (such as knowing and storing the ID of all of your customers, and making sure they're not on OFAC's lists of banned countries or banned persons). The mixing doesn't actually enter in to it.