Sweden must repay $1.6M in Bitcoin to convicted drug dealer
nypost.com
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Erm, no, that's not how the blockchain transactions work. you can see everything. It's an open ledger.
Anything you tumble, you can (provably) de-tumble. It's just expensive and time-consuming (re-building the blockchain state, yadda yadda). Crypto banking is less anonymous than actual banking, especially if you actually want to pull your money into fiat and need to go through an exchange.
One-sided JM for BTC include Wasabi and Samourai Whirlpool. Though Samourai are a bit sketch IMO.
not really? If you have a transaction that has five equally sized inputs A_{1...5} and five equally sized outputs B_{1...5}, then the max extent you can "provably" de-tumble B_1 is saying "there's a 20% chance that it came from A_1, 20% chance it came from A_2, ..."
You can't do this[1], as the blockchain does its best to be perfectly deterministic. Best you can do is get an oracle to get you a random seed (which you'll see publicly in the oracle token), so you'll know exactly "what went where."
[1] https://blog.chain.link/random-number-generation-solidity/
Doesn’t it just need to require that the sum of the inputs is equal to the sum of the outputs?
The transaction chains are generally constructed off-chain.
For Ethereum you can do fancier things with zk constructs, like Aztec and Tornado Cash.
Source? Enough CoinJoins (Wasabi+Joinmarket) and I don’t think so. Note CJ work a bit different than the oldschool custodial tumblers. Combining CJs with LN (reverse) submarine swap for another layer.
With large enough anyonymity sets you should have plausible deniability. This is also a bit time-consuming, more so the larger the amount; there’s no way to do a complete end-to-end transaction of billions of dollars untracably in mere hours without standing out I think. But if you have days/weeks to break the link I think it’s def doable and done.
Obviously make one single mistake and you’re out, but that’s in the nature of these things.
If I’m wrong I’d very much appreciate something substantial.
I don't really know, but putting myself in a criminal's shoes, I don't like the idea that my transactions stay in plain view forever. It makes statistical attacks very, very easy. It also makes me vulnerable as-of-yet-undiscovered statistical attacks.
BitCoin is arguably the worst thing for organized crime.
We will soon be living in a world where crime is the norm.
Why do you believe tornado to be secure? The project is self described as experimental software.
“ Tornado.cash was audited. However, it is still an experimental software. Please use at your own risk.”
Some people will say they aren’t doing anything big enough to warrant attention but that’s forgetting that everyone using a tumbler is paying extra to help anonymous strangers launder money. If anyone involved attracts attention it’ll bring scrutiny to everyone else, and potentially the need to prove that you were “just” committing a small-scale crime and didn’t know that most of the other coins being tumbled belonged to a cartel.
Once KYC gets involved.
If I receive coins in my desktop wallet for the cookies I'm selling, how will anyone know who I am? Of course they're not much use until I cash out and then it's a different story.
Or you could use the currency as a currency. Sure, there are a lot more flour suppliers who exclusively accept USD vs ones that take BTC - but compared to the way things were 10 years ago...
Try to buy a Tesla or a house anonymously. All large transactions are subject to KYC.
You usually need some form of distributor's license to not have to pay sales tax on the transaction. That license requires identification.
Of course you could refuse that and just pay the sales tax, but who does that? I would be a little surprised if they even had the means to do it. Warehouses normally sell to distributors, who have distributor's licenses so they don't pay sales tax. Why would they have a system to collect sales tax and send it to the government? That transaction is going to stand out, a lot. Trying to pay for it in Bitcoin is only going to make it worse.
Unless, of course, you're trying to pay the warehouse manager to help you steal the dishwashing detergent. There's no papertrail, but remarkably high counterparty risk. Plus at the end you're stuck with a bunch of hot dishwashing detergent that you're going to have to offload.
Way back in the day I took some profit by purchasing something like $50k in server hardware that needed to be bought one way or the other. Nothing but a "ship to" address and a BTC private key. Was I trying to secretly launder money? Nope, just a boring business transaction that didn't involve VISA. Was it to cheat the tax man? Nope, the IRS had very pointed refused to issue tax guidance up to that point (and continued to do so for years) - so I just paid the long term capital gains when doing the other paperwork one does in a self funded a business venture.
I always wonder about the people who assume cryptocurrency is something that needs a level of law enforcement scrutiny beyond any other method of payment, how much misinformation was required to yield that result, and if they'll be able to adapt to the inevitable.
It sounds to me like you tried to purchase from a seller who expected to be paid in USD, not BTC (which doesn't need a "processor"). Do you really not know why this is a silly complaint - especially given the context?
You're not just dependent on your own opsec, you also have to worry about anyone you receive from or send to.
It's definitely a lot more difficult nowadays, though.
It's because KYC requirements and money changing regulation were applied to people selling btc in any real quantity. Someone I knew caught a case a few years ago for doing essentially the localbitcoin (and not telling the undercover to leave when the cop implied he got the money from selling drugs... allegedly).
If I bought cookies from you and paid with crypto you have to know the address I want you to send the cookies to. Or I have to pick them up in person and you'll see me. Either case greatly reduces anonymity.
This vulnerability doesn't exactly exist for all crypto. Privacy coins aren't necessarily unique (or at least for practical purposes). The uniqueness of the coin is what allows it to be tracked. That's why we know where the GOX coins are and this is why that hacker can't use those coins. As soon as they try to turn that into real money we got 'em.
What stops them from converting the coins into something else (e.g. some other cryptocurrency or commodity) in a jurisdiction that doesn't do KYC, and then converting that into dollars? Or just dumping it into a cryptocurrency tumbler?
The whole concept of tracing the source of money is kind of ridiculous. If somebody robs a bank and the bank robber buys a shoe and the shoemaker buys a cake and the baker buys a portrait and the artist buys a screw driver and the hardware store owner deposits the money with that serial number in the bank, the hardware store owner has really nothing to do with the bank robbery, and isn't going to remember which of their thousand customers paid them with that specific bill.
And if you try to say the hardware store owner doesn't get to keep the money all you're doing is causing the money to be stolen twice.
Exchanges typically ask for an ID in most countries these day before you can purchase any crypto. I'd be curious how you avoid detection unless you started very early in crypto by mining on your own. You'd still need an ID to exchange back to fiat anyway.
Last time the US tried to sanction a Monero address, it ended up sanctioning a transaction.
While bold cryptographic claims should be taken with responsibility, monero is researched and implemented by well known criptographers and researchers in a very serious way. Almost all (if not all) aspects of the protocol come directly from proven and well understood theory and published research.
EP dropping Dec 2021.
I have a lot of friends and acquaintances who (despite my nagging) work at cryptocurrency shops, and I personally do some entirely separate work on provable computation. To call cryptocurrencies' use of zero-knowledge proofs "proven and well understood" is a tremendous overstatement: they're a brand new area within cryptography. We don't really know what their properties are yet, and we haven't even begun to comprehensively document weakness in construction, implementation, &c. the way we do for actually established cryptosystems. The deluge of published research on ZK/OT/&c. is evidence for this: everybody is scrambling to explore and publish on a new, immature research domain.
At the end of the day it is a matter of trust and risk. I trust the mathematics of it because I took the time to read about it and understand the claims of security being made. I also have some trust in the team writing the software because I have been following their development relatively close. You may have done the same and come to the conclusion that they are not that serious or competent, but claiming that Monero is not to be trusted because the cryptography is too new is just an exaggerated view. This things are not being claimed without a proper basis.
Now, I am only talking about Monero here, there are several other crypto-systems using more esoteric methods than Monero that I wouldn't have the same trust in them, like ZCash and its derivatives. They use far more novel cryptography (zk-SNARKs) and some debatable design decisions (trusted setup, optional privacy, developers taking a chunk of mined coins).
A similar (but opposite) thing happened in a civil case during the 90's [0] where a transport company delivered oil to a refinery in Sweden. The oil producer sued the transport company, and asked the Swedish government to seize the payment for the oil (denominated in dollars).
The Swedish government seized 3M USD, but immediately exchanged it for SEK. During the court case, the SEK was devalued by ≈ 17%. In the end when the case was resolved and the seizure was released, the transport company sued the government because they wanted their 3M USD back, not 17 percent less.
The transport company won and the government had to pay them 3M USD back.
If this had happened, I would not expect them to be forthright about it.
I'm guessing that it's fairly common that prosecutors "förverkar" regular goods (like watches/jewellery/cars) in similar ways, where they claim the physical thing and not the monetary value. BTC and other crypto should probably be treated in this way.
[0]: https://www.dagensjuridik.se/nyheter/aklagartabbe-gjorde-kna...
Even as a recognized currency, it should have been recorded as the actual and not equivalent value in another.
If someone sold drugs for cash, and used the cash to buy a lottery ticket - should the government demand the cash or the ticket? What if the ticket ends up winning?
If someone sold drugs in addition to a legal business and invests all the profits into the SP500 should the government take the entire stock portfolio? A percentage equal to the amount of dirty money put in?
What if the person appeals and wins after the asset has been liquidated? How do you make that person whole again? Do you?
I can't believe this problem hasn't been figured out before crypto. Tbh it probably has, but because it's Bitcoin we will write an article about it.
https://www.justice.gov/criminal-afmls/file/839521/download?...
It covers crypto, real estate, stocks, and a bunch of other things explicitly.
Why would the seize the entire portfolio?
On the one hand it's all "blood money" / tainted, but the actual proceeds at the time of the crime have a specific value.
It sounds like the police tripped a loophole in law by liquidating some of the BTC. Sounds like if the police had HODL'd they'd have been fine defending it as just look, these were the assets he had, we seized them. But since they liquidated, the defense got to say, hey, you already got the full proceeds.
From the article - "The lesson to be learned from this is to keep the value in bitcoin, that the profit from the crime should be 36 bitcoin, regardless of what value the bitcoin has at the time".
> "It has led to consequences I was not able to foresee at the time."
> "I think we should probably invest in an internal education in the [prosecution] authority, as cryptocurrency will be a factor we'll be dealing with to a much greater extent than we are today. The more we increase the level of knowledge within the organization, the fewer mistakes we will make."
I'm not familiar with the swedish legal system (and not a lawyer), but often you can only be convicted for things the prosecution requests/accuses you of. Otherwise you can't defend yourself in court.
So the prosecution ordered the bitcoin to be seized as proceeds of the crime, but not in a correct way, so the court ruling contained the same wording that a specific value in swedish Kronen shall be seized. Had the prosecution demanded the seizure in terms of Bitcoin instead, the court would probably have approved it too. However, at this point it's too late to change the ruling. Courts exist to settle things, and one can't simply re-roll a prosecution case unless there were grave mistakes.
One interesting consequence is that the drug dealer would have had to pay the difference if bitcoin had dropped in value instead of rising.
In Florida (and many other states) it was/is common practice that any excuse police made could be used to seize almost any of a person's property, essentially on the spot. Generally without even needing to arrest the person or charge them with a crime or get a warrant. Just based on "suspicion" on the cops behalf.
Thank good Ole "rule of law" President Reagan and the war on drugs for that one. See:
- https://cplaw-miami.com/police-seize-your-property-without-a... - https://www.vox.com/policy-and-politics/2017/12/1/16686014/p... - https://en.m.wikipedia.org/wiki/Comprehensive_Crime_Control_...
It's fine, the dog jumped at the window of your stopped car.
Otherwise, you'd have to pay for the loss in value of a seized car if it's sold only years later or the loss in value of gold bars seized if the market on those crashed in the meantime.
Another possibility is that this really only arises as a result of the fact that the drug dealer received payment in bitcoin whereas it's less likely a drug dealer would be paid in gold or cars.
The state seized X $ of assets from you and notes as such. After 6 months, they finally get to auction it off, it is now worth X + Y $. Since the state seized X $ of assets, they ought to give back the Y $. They got what they wanted as they have seized X $ not X + Y $.
If the assets are now worth X - Y $ (Y <= X) then nothing happens, as the state has seized the amount X from you already. They got what they wanted back then and that it is worth less is not your fault.
The house is then auctioned off. It's not valued at the time of arrest and any additional value returned to the person arrested.
I don't understand why it could, or should, be any different for electronic stores of value (stock, options, crypto).
As I understand this article, the same would have happened if the legal paperwork listed the value of the house in crowns, and then the housing market rose and the house tripled in value.
The only unusual thing with Bitcoins, is that the value thereof has risen to quite extreme proportions.
> what proceeds should be stripped if you get cash in exchange for drugs and use that cash to buy GME calls which skyrocket?
> but the actual proceeds at the time of the crime have a specific value
The specific value at the time is, in nearly every other situation, irrelevant. The mistake was putting a claim to a monetary value of *asset* rather than the *asset* itself.
A guess at why it's like that would be - people flow value of drugs/illicit goods, rarely holding the value for long. This means the prosecutor wants to set an amount for "all drug deals they can convict for" and then try to seize that value.
Clearly before crypto the only thing that would wildly fluctuate vs the country's currency is stocks. No one's doing drug deals in stocks so the law was written in value. If they did seize things like stocks it's clear they had a process to sell the liquid asset (they tried to sell the BTC), but they couldn't get their ducks in order to sell it, haha.
I'm sure there's going to be a change to the law to seize the asset as a whole instead of pegging it to some particular value.
I assume under this approach the authorities would have claimed the full amount you started with and not what you were now left with. Crypto just happens to have been a casino where people have been winning.
People have been saying they have their own nexus currencies for the whole last decade, and others spent too much time ignoring that in. Now it bit Sweden in the ass, for now.
So unlike buying a house or buying stock options, the argument can be made that the crypto is itself the medium of exchange and therefore the value in fiat is irrelevant.
But this also means that if the crypto drops in price while the cops are HODLing it, they lose out.
my question is whether we should consider these crypto clean, or whether we should stop trying to determine if crypto provenance is clean or not as it doesn't seem possible to rely on the due process of every municipality worldwide, unless the state is deemed as the crypto washer - magically cleaning all crypto as it temporarily seizes and auctions them or returns them - in which case a state will take advantage of that
This is especially easy to do with digital coins (vs. say a room full of furniture which could incur not-so-insignificant storage costs.)
The same might happen for every other "foregin" currency, right?
This wasn't part of a fine, rather, they simply took the BTC as part of the drug money, so it's not like the government could argue that if it lost value they should be owed the remainder.
And literally two paragraphs above that:
> The prosecutor added that the case was the first in the country’s legal history in which cryptocurrency was seized, so there was no legal precedent to look toward.
The preferred payment method of crime that has never been encountered by legal authorities in one of the most developed countries in the world. Very interesting.
If it was a car that they confiscated, would they still have the car or would they also need to buy the car today? I am honestly curious as to how this makes any legal sense.
That's the key indeed. I think I get it now! Anyway, the simple thing would be counting btc if btc is confiscated and counting cars if cars are confiscated. Then I don't see how it could blow up, but I guess it just can't be that simple.
"But by the time the Swedish Enforcement Authority began auctioning off the crypto, bitcoin had skyrocketed in value — and only three had to be sold to amount to the value that was booked as the dealer’s profit at the time of his arrest."
If the police confiscated everything you owned to cover a fine for $100, isn't it reasonable to get the difference back?
I think it's more that they're mad because someone managed to make and keep 7 figures profit from a crime that they were caught doing purely because the justice system screwed up.
It's hard to keep the "crime doesn't pay" messaging when stuff like that happens.
Legally this is correct and exactly what happened.
The reason this is becoming an issue is that all the bitcoins that were seized were from selling drugs. The point of the fine is to match the profit of the crime so reasonably it should have taken all of the bitcoin regardless of the underlying value.
If he had sold drugs for a gold ring and then the price of gold went up, should he have gotten a bit of the ring back?
https://sverigesradio.se/artikel/domda-knarklangare-far-mang...
That seems to be an assertion the prosecutor made, but I see no facts to support that statement. Prosecutors say those sorts of things all the time in order to win cases.
Are you saying the prosecutor is correct or that the translation is false?
Those 200,000 Bitcoins he found have sat untouched since he found them. The bankruptcy case restricts him from touching them but since 2014 when Mt. Gox filed for bankruptcy, the price of Bitcoin has skyrocketed. At the time of this recording it’s now worth over $10,000 per Bitcoin. Mt. Gox owes their creditors 450 million dollars which is what the Japanese courts have locked in as what he owes. But his 200,000 Bitcoins are now worth two billion dollars. If he were to pay off all his creditors today, he may then get to walk away with over one billion dollars. [1]
That doesn’t mean that when you make a profit selling potatoes that you can pay your taxes in potatoes.
What I dont support is taxing when switching in between crytocurrencies. Which in the analogy would be me exchanging my potatoes for carrots. Imagine if I had to pay taxes on my exchanged potatoes while I didnt make a dime on that.
That said, I agree it's frustrating that you are liable for what are unrealised price changes (IMO it's not profit until it's in the bank).
In the United States and in many other jurisdictions, if you realize a profit through commodity exchange, you owe tax on the fair market value of the exchange.
I lost trust in the Swedish justice system when they reopened Assange's rape trial.
How is Bitcoin different? If I buy a rare car from cocaine money does that mean that if they sell for more money than I paid for it I get the money back?
Does a random country’s random procedural gracing make the crypto magically clean again?
It was seized, and now its not! So the crypto is clean now! It doesn't matter if you respect that country! Or even that a municipalities civil asset forfeiture process!
To me this has been a big hole in Elliptic and Chainanalysis’ business, along with other merchants and exchanges that try to trace crypto origins to determine if the account should be frozen or not.
I’m open to opinions on this, but my current thought is that attempting any crypto AML/KYC is a joke, but its great snake oil to sell to exchanges and government agencies. I think crypto accelerates and illuminates the folly of transaction whitelisting/blacklisting.
See, I can play cops and robbers too. However, growing up I thought it was two distinct groups. The cops on one side, and the robbers on the other. As an adult, I see it was just two descriptions of the same group.
Then wonder what happened to law and order
As they say in the article, next time, if they seize 36 bitcoin, then you have to give up 36 bitcoin, not the dollar value they are worth at the time.
All money is make-believe.
You can also get into "everything is make believe" easily enough, so this isn't very helpful either way.
If you think of Dollars as "get out of US jail" cards it's pretty easy to see how they have intrinsic value.
The IRS not accepting cryptocurrencies is irrelevant; you can take a look at any trading platform and find that there are people, right now, willing to part with more than 49000 of their "government backed US dollars with their intrinsic value and ability to pay taxes" to acquire a single bitcoin.
Corruption is relatively low in Sweden and in this branch I consider it essentially non-existant.
https://www.theverge.com/tldr/2021/2/5/22268646/german-polic...
Edit: it says the govt gets to "keep it", not him. If he has the seed to his wallet, is there anything stopping him getting at his coins?