US Secret Service: “blockchain is an opportunity to track money” | Hacker News Reader

US Secret Service: “blockchain is an opportunity to track money”

coinpaper.com

78 pointspaulpauper62 comments

I’m super not interested in “doing crime” on a permanent public ledger - no matter how good the math is today.

It’s a gamble. A gamble that the zero knowledge proof, implementation, etc. will outlive the statute of limitations for whatever crime I commit. If it’s broken before that, my only hope is that I’m a small fish in a big pond of crime.

I understand that past a certain threshold of crime, the risks of moving large volumes of other assets exceed the risk of a blockchain. But I’m not here to make large scale organized crime more resilient.

I’ll pay cash thank you.

(As a side note, I’m surprised at how many folks use Venmo for this stuff. The social feed is hilarious. Like it’s cool I can see that some dude I haven’t talked to since grade school sent some other dude $45 for weed. Not sure I needed that feature though.)

> A gamble that the zero knowledge proof, implementation, etc. will outlive the statute of limitations for whatever crime I commit.

And that is only for the blockchains which do actually use ZK-proofs. Like, say, David Chaum's upcoming "XX network" chain (FWIW David Chaum is the author of Digicash, predating Bitcoin, and one of the seven papers cited in Bitcoin's whitepaper).

Most blockchains by very far are using a public ledger and zero ZK crypto.

Monero uses them too of course, the one people actually use, so it's the better example rather than something obscure you're obviously trying to promote

Every elliptic curve signature, used in nearly all cryptocurrencies to transfer funds, is a ZK proof of knowledge of a private key, so most blockchains do use some ZK cryptography.

http://www.vicemo.com/

Sadly looks like it stopped updating.

> I’ll pay cash thank you.

And if that's outlawed I'd pay in cigarettes, ammunition, or my kids marble sets before reaching for Blockchain based currencies when commiting crimes.

There's a TED talk out there where an FBI digital crimes investigator refers to the Bitcoin Blockchain as "prosecution futures" -- they might not know who is behind a specific BTC address today but they have identified the people behind most of the transactions they track over time.

I couldn't find a TED talk from my quick search, but for reference, there is a transcript of a talk at Amherst College [1] that mentions the concept:

Alex Tapscott (at the talk as an Amherst College alumnus, known for being the CEO of a cryptocurrency company and writing a popular book published in 2016 about cryptocurrency): "The FBI started calling Bitcoin prosecution futures, because whenever someone spends it, down the road with enough information they can actually trace it back to who the original spender was, and they were able to reclaim a whole bunch of lost coin."

I searched a bit more to see if an FBI agent or attorney used the term on-the-record, but it looks like the closest source is a New York Times article that quoted lawyers without naming a name [2]: "Hence Bitcoin’s wry new nickname in legal circles: “Prosecution Futures.”

[1] https://www.amherst.edu/alumni/learn/amherstreads/pastfeatur...

[2] https://www.nytimes.com/2014/01/19/business/eagle-scout-idea... ; The MIT Technology Review cited this article with their report that prosecutors have begun to use the term "prosecution futures": https://www.technologyreview.com/2014/02/18/173936/marginall...

Maybe I'm missing something but since bitcoin is a public ledger and exchanges all have KYC features it seems worse than buying visa gift cards with cash from a privacy perspective. I don't know that much about the crypto space honestly, but it didn't seem to make sense to me it was the go-to currency for criminal transactions.

Bitcoin's advantage is worked online for people who are banned from normal online payment mechanisms.

There are other privacy oriented coins that may do better than bitcoin for avoiding tracing (monero?) but the main reason criminals used it is it worked and nobody really cared about drugs, etc.

You can use mixers and the like to obfuscate the address that hits the exchanges from the address that is used for crime. When properly executed the strategy is foolproof unless the mixer you use is a honeypot. The issue is that there's a goodchance all the mixers are honeypots and properly executing the strategy requires an amount of vigilance that is beyond most organized crime groups.

> can use mixers

This is automatic acceleration of probable cause. If you’re a state-level actor, mixers are fine. (You have a state behind you.) If you’re just having fun, go for it—it’s neat conceptually. For anyone less, take a lesson from the cartels.

There's no way to prove you were the one to use the mixer vs just buying the coins from someone else who did.

Are you confident enough in that assertion to launder a few million in drug money?

It reduces the pool of potential suspects to a small enough list that Secret Service agents could visit each in person.

The minute your address interacts as a counterparty to a known mixer you're automatically flagged and everything around your risk profile accelerates dramatically. That wallet is effectively burned and you'll be locked out of using any kind of reputable exchange.

Obviously you don’t go directly from the mixed wallet to the exchange. Send some of the coins to different wallets a few times and say you bought the coins with cash from someone you met once. Or, if you’re willing to go the extra mile use that wallet to buy an NFT and the NFT wallet can use the exchange.

The mixer may obfuscate what happens inside it but unless it's a coin like zCash or something it's impossible to obfuscate that your coins interacted with the mixer. The ledger is cryptographically verifiable and completely public. A mobsters cooked books offer more protection than a blockchain from that and good forensic accounts untangle those all the time. A blockchain just makes it easier to automate the untangling.

Throw in the fact that it's grey territory legally just using the mixer and I think most people are vastly understating the risks of using a mixer even if they did nothing wrong with the money otherwise.

It’s not illegal to have coins that at some point in the past were mixed. In fact I suspect that most bitcoins can be traced back to a mixer if you go back.

Might not be illegal, but you’ll never be able to cash out.

>you’ll never be able to cash out

P2P dexs dont care about mixer usage, you can always find a way to cashout if you have the private keys.

Perhaps, but as regulators step up it’s going to devalue things once people know coins from tainted chains are going to be harder to resell. That’s going to further increase the risk of using mixers since the people using them for ideological reasons are going to scale back their usage as it starts costing them money & adding risk.

Mixers are going to be fun for the IRS.

All that money sloshing around and untaxed.

Nowadays monero (XMR) is the go-to since addresses aren't reused and transactions are encrypted.

> The agency claims it can recover stolen crypto and advises using cash for privacy.

Just don't use too much cash, lest you run afoul of banking regulations or become a victim of civil asset forfeiture.

Also interesting that a federal agency would be on board with anonymous monetary transactions.

Notice they don’t mention anonymity, just “privacy”. I’m kind of tempted to read it as privacy from third parties but not privacy from the government.

That's not a direct quote from an FBI spokesperson and instead just part of the subtitle of this article. I personally wouldn't read that it's "private, and not necessarily anonymous" as it seems likely that the author didn't distinguish so strongly between these things.

To the point of anonymous cash transactions, I strongly suspect there are ways to acquire cash in a way that the bills which are used in a given transaction aren't necessarily traceable to the individual who made the transaction. I've heard mention of such tactics but never tried to put them into practice because I don't care enough (in most cases) to make it more than theory.

> don't use too much cash, lest you run afoul of banking regulations or become a victim of civil asset forfeiture

Don’t hold too much cash. That single-handedly neuters the latter. Unless you’re spending $10 to 100k a month, banking regulations won’t give you an issue. (Below, you’re innocuous. Above, you’re big enough to find a bank that gives a fuck.)

My pet theory is that Bitcoin was created by a Five Eyes intelligence service.

Agreed, seems like a very elegant method to create your own black budget.

and this is exactly why its not. I think we can all agree that the hollywood idea of competent people behind the scenes in positions of power has been proven wrong again and again. Any 4d chess move is the accidental consequence of a move so dumb that it becomes unimaginable to us.

we certainly do not agree on this.

There have been similar schemes, like those privacy phones that were directly ran by the government.

Exactly what a competent person behind the scenes would say.

Def seems like it's involved in whatever is the next evolution of BCCI.

Can read more about it in this book. I'm not sure where to find the definitive account.

https://www.thriftbooks.com/w/american-exception-empire-and-...

Whitney Webb's new book also has a lot of detail on BCCI

https://www.goodreads.com/book/show/51074723-one-nation-unde...

This looks very interesting. Thanks for the recommendation!

I think the same. It's just too difficult to prove it.

"Blockchain is an opportunity to track money"

Cool, let's start by putting all government transactions on an open blockchain.

With carve-outs for national security and privacy sensitive transactions, most government transactions have long been public.

> national security and privacy sensitive transactions

That is an arbitrarily BIG gap.

There's no erasure or loss of information in the ledger, as in with cash transactions. It's just obfuscation, so yeah, it can be a treasure trove of forensic information.

I can’t, for the life of me, understand how anyone thought “public ledger” meant “hide transactions.”

It’s the same concept as tor, in a way: once you get it out, that’s the nucleation point for tracking.

And people didn't believe me when I was saying Bitcoin is a CIA/NSA/FED joint project, the goal was and is still pretty clear at this point

> CIA/NSA/FED joint project

These guys variously compete for turf and are irrelevant to each other.

Yet they share a common goal

An example: https://qz.com/1145669/googles-true-origin-partly-lies-in-ci...

An other one: https://www.spiegel.de/international/world/how-the-nsa-spies...

Neither mentions the Fed. (The Fed doesn’t really do AML/ATF. Its business is in aggregates.)

I’m not discarding the NSA/CIA hypothesis. Just the monetary component. Fed officials don’t need clearance and can whistleblow in a way the IC cannot.

I love how our benevolent government creates so many different rules and regulations and laws. It's really wonderful

No kidding

Link to the actual AMA?

Sorta misleading. They can recover crypto only if they are somehow able to crack an encrypted file, coerce an exchange, or coerce the perp into giving up the keys.

Five minutes with a claw-hammer should suffice for the latter.

relevant-xkcd-comic.jpg https://xkcd.com/538/

They’re pretty good at the second part I assume, the practice is as old as humanity itself

> They’re pretty good at the second part I assume, the practice is as old as humanity itself

wrong. it's as old as civilization itself, yes. But humanity is not exactly the same as civilization

edit: so the numbers (of votes) say that I'm wrong, so humanity is the same as its civilization? wtf.

Or maybe people just see the comment as needlessly pedantic, adding nothing of value to the conversation.

Are you a bot, or did we just happen to say almost exactly the same thing within seconds of each other?

Given that your comment ID is two higher than mine, you must be the bot, or I am a bot that can predict the future ;) But yes, I was also amused by the almost-identical phrasing.

You're being downvoted for being needlessly pedantic while adding nothing to the conversation. This is not reddit. Things work a bit differently around here, so lurking before posting is suggested.

> so humanity is the same as its civilization

It’s pedantic, as others point out. But it’s a fun derailment, and I’ll argue yes.

Humanity is not the same as being biologically Homo sapiens. What it means to be humane is inextricably linked to the bonds of society. (And that’s before fun hypotheses like bicameral mentality [1]. Granted, in the same folder as the one-electron universe.)

More fundamentally, using force to get something you want is as old as carnivorism, older than humanity, civilisation and even mammals.

[1] https://en.m.wikipedia.org/wiki/Bicameral_mentality

I thought the feds were able to do this after they took down AlphaBay?

... Like this?

Ledger seed can be exfiltrated by firmware update: https://news.ycombinator.com/item?id=35965742

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