© Contributed by Andy Greenberg, author of the new book Followers in the Dark.A version of this article originally appeared in the TIME Into the Metaverse newsletter. Subscribe to the weekly Guide to the Future of the Internet. Previous editions of the newsletter can be found here .
Over the past decade, criminals have increasingly turned to cryptocurrencies to conceal illegal activity, and Wired 's Andy Greenberg has been covering it up since the beginning. However, his new book “Stalkers in the Dark: The Global Hunt for Cryptocurrency Crime Lords ” is dedicated to the enemies of cryptocurrency fraudsters and criminals: federal agents who use the transparent qualities of blockchain to keep tabs on anyone. . sympathizers and put them behind bars.
The book, for example, details how blockchain tracking techniques led to the arrest of 337 people involved in a gruesome dark web that distributed child pornography. These users feel that their identity is protected through the use of bitcoins on the network. But the open nature of bitcoin transactions has allowed them all to be tracked down and arrested.
Greenberg's (Doubleday) book chronicles the growing era of cryptocurrency scams, including the $400 million hack of the now bankrupt FTX exchange. In a phone call, Greenberg discussed the nature of this attack and the risks associated with both anonymity and online surveillance.
Excerpts from the conversation below.
How did you come to write a book about tracking crime with blockchain?
The report is from 2011. At the time, I was involved with a group called the Cypherpunks, a largely libertarian movement in the 1990s that began dreaming of using crypto technology to weaken governments and corporations and give to individuals. That's when I realized Bitcoin, which seemed like a Kryptonian invention.
At that time, the remarkable feature of bitcoin was not just buying a cup of coffee, but putting a bunch of unmarked bills like money in a bag and sending them out into the world without revealing anything. your identity. It seems bitcoins can be anonymous and untraceable. As a self-interested and uncontrollable person in this cybercrime world, I felt that it would open up a whole new world of online crime, money laundering, drug trafficking and cybercrime.
It definitely happened. But it took a decade to realize that untraceable bitcoin was actually the exact opposite. Cryptocurrency tracing was not only possible, but an incredibly powerful research technique. In the hands of a small team of detectives, it leads to one massive crime operation after another, each bigger than the last.
For now, let's talk about some big news: FTX founder Sam Bankman-Fried admitted this month that the cryptocurrency exchange mixes client funds with those of investment firm Alameda Research. . Why has no one found proof of this on the blockchain yet?
In the midst of this golden age of cryptocurrency tracking, when many known criminals are being tracked, identified, charged, and arrested for cryptocurrency tracking, it is amazing to see this great black hole of financial irresponsibility. or negligence happen right under our noses. . . But he ignored the warning.
I think part of that is because it is considered a legitimate player in the cryptocurrency economy. It wasn't a black market trying to get out of control. But I don't know if the actual cash flow from FTX to Alameda is visible on the blockchain or if it happened on a different level from those companies' accounting systems.
It should be noted that this is an obvious theft of around half a billion dollars in FTX funds. Apparently it's a real crime.
The interesting thing about cryptocurrency properties is that we can all see that $500 million movement through the blockchain. Many of the main characters in my book follow the movement of money. It would be very difficult for someone who took this cryptocurrency from FTX to withdraw it anonymously. We will almost certainly have an answer as to who took the money.
You see this in many thefts: someone steals a large sum of money and has a very difficult problem figuring out what to do with it. You can often see how they freeze for years. The problem isn't stealing: it's too easy. They get away with it and launder that money in such a way that you can actually spend it on something.
Do you think most people using cryptocurrency in 2022 realize they lack privacy?
I think most crypto users probably don't care if they are anonymous or private: they just buy them as a speculative investment. For people looking for financial privacy, they realized that most cryptocurrencies, and of course bitcoin, are not private. This is partly seen in their shift to more private currencies like Monero and Zcash. This is also evident in how most cybercriminals are based in places where it is not important to be tracked, such as Russia and North Korea.
I think there is an ever-diminishing but existing group of people who believe they are one step ahead of law enforcement and surveillance. But it's all too easy to think you're doing enough to avoid this follow-up when you're not. And there's a whole industry of very smart, well-funded people out there whose job it is to find ways to surprise you and track the seemingly unlikely.
How have independent law enforcement agencies and tracking companies stepped up their game since most of the reports in your book took place?
When Tigran Gambarian (the IRS agent and investigator who is the hero of Greenberg's book) hunts down rogue Secret Service agents, he essentially works alone, after hours, and without any real tools. Now, if you fast forward to 2022, IRS criminal investigators have consistently used this method to make the first, second, and third largest cash seizures of any kind in DOJ history. All major law enforcement agencies in the United States, and perhaps other law enforcement agencies around the world, have entire teams doing this job well. I know the FBI, DEA, and IRS have full-time cryptocurrency analysts.
But there's also an arsenal of tools created by an entire industry of companies, including Chainalysis, the first startup to focus on tracking bitcoin as a business. Now they compete daily with Elliptic, TRM Labs, CipherTrace and more.
Read more: Inside the Chess Game That Led Feds to $3.6 Billion in Stolen Bitcoin
The game of cat and mouse will continue to evolve, or at least the feline side will continue to look just as raw and alive. Everyone is eager to find new ways to track people's money.
It also means that these tools are becoming commoditized. If you are a law enforcement agency and you don't know how to track cryptocurrency, there is no need to learn. You can simply contract with one of these companies who will provide you with very useful tools to do so and teach you how to do it.
At the end of her book, cryptography professor and hacktivist Sarah Meiklejohn worries about how authoritarian governments use this power.
One scenario is that people may want to use cryptocurrency to pay for abortions in countries where the procedure is illegal. It is now available to watch. Internationally, it is distressing to think how repressive Russia, China or other powerful repressive regimes could use this tool to suppress people seeking financial privacy or fundraising for dissent, journalism or controversial activities.
It is certainly a spiritually complex ability. I'm not necessarily saying that Chainalysis or the US government will abuse it. But it seems clear that at some point these abilities will become available to systems we'd rather not give them new control powers.
When I wrote this book, I was afraid to tell the whole story from the point of view of law enforcement: I didn't want to tell a simple story of cops and robbers. Many stories came from federal agents and prosecutors, and I felt I had to give the perspective of someone who could really fix things. Luckily for me, Sarah is the conscience of this story. He invented many of these techniques, but chose not to work in the cryptocurrency tracking industry. He is a very thoughtful person who can talk about the not-so-good stuff to track cryptocurrencies easily.
In August, the Treasury Department sanctioned privacy-preserving blockchain tool Tornado Cash , saying it posed "significant threats to national security" in the United States. His lawyers sued, arguing that banning it would criminalize privacy. What do you think of this legal battle?
I don't think the future of cryptocurrency privacy depends on the outcome of this case. There will be other decentralized services and mixing tools like ZCash and other altcoins that are already hard to track. And as these tools become more widespread, there will be new battles over the issue, both technical and political.
I believe that untraceable transactions are still possible and that a real world of financial privacy can still exist, for better or for worse. Some of them will undoubtedly be criminals.
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