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The rise of crypto laundries: how criminals cash out of Bitcoin

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Re: The rise of crypto laundries: how criminals cash out of Bitcoin

#161

Post by DennisP »

vmception wrote: post #150
DennisP wrote: post #143

Earlier quoted context omitted.

There's little practical difference between: a) I give you my wallet, and you immediately send the coins to a new address to protect against my (potential) copy of the wallet, or b) I just send the coins to your new address myself. Either way, the blockchain records a transfer from my address to your new address.

The difference is in the liability incurred. So you're the blockchain analysis firm for the Department of Justice, and you're like "omg omg look the coins are moving! omg omg look its going to a centralized exchange account lets go subpoena the records and find out who has the KYC and identifying information behind that account." DOJ busts down the door "aha! got you!" If it was the person that actually hacked or did…

I'm saying there is literally zero difference on chain between the two scenarios.

Re: The rise of crypto laundries: how criminals cash out of Bitcoin

#164

Post by vmception »

DennisP wrote: post #161
vmception wrote: post #150

Earlier quoted context omitted.

The difference is in the liability incurred. So you're the blockchain analysis firm for the Department of Justice, and you're like "omg omg look the coins are moving! omg omg look its going to a centralized exchange account lets go subpoena the records and find out who has the KYC and identifying information behind that account." DOJ busts down the door "aha! got you!" If it was the person that actually hacked or did…

I'm saying there is literally zero difference on chain between the two scenarios.

onchain, correct, it is indistinguishable.

the reality offchain can be very different, I was trying to make clear just in case you or others that didn't catch that. but I think we're agreeing on everything.

Re: The rise of crypto laundries: how criminals cash out of Bitcoin

#165

Post by mdavis6890 »

ccity88 wrote: post #14

I get that money laundering is always linked to criminal activity, but how have we always just accepted the lack of personal privacy when it comes to finance? Privacy is a feature, not a bug; and whilst crypto may not be the way forward, I hope one day we can reach a solution that has both privacy and also safety. The language used by law enforcement is quite alarming, it suggests that they should be privy to ALL tra…

It's important to realize that attribution - knowing which human got which money when - is actually very important in many contexts, particularly when a lot of money is involved. This allows for an un-do button in the case of mistakes, fraud, etc. If I'm wiring my down payment for a house for $200k, it's nice to know that if I fat-finger the receiving account I can get the money back. How would you feel paying your down-payment in cash or BTC? How about when Citi accidentally paid an extra $900M (or something like that). Normally they'd be able to get all the money back (actually in that case they couldn't, but that was a weird anomaly).

I'm all for privacy, anonymity, etc - which is one of the reasons I'm very excited about crypto - but you always have to look at things from multiple angles.

Re: The rise of crypto laundries: how criminals cash out of Bitcoin

#166

Post by matheusmoreira »

ccity88 wrote: post #14

I get that money laundering is always linked to criminal activity, but how have we always just accepted the lack of personal privacy when it comes to finance? Privacy is a feature, not a bug; and whilst crypto may not be the way forward, I hope one day we can reach a solution that has both privacy and also safety. The language used by law enforcement is quite alarming, it suggests that they should be privy to ALL tra…

Nobody accepted this. Governments just imposed it on us.

Re: The rise of crypto laundries: how criminals cash out of Bitcoin

#168

Post by derefr »

vyrotek wrote: post #126

After learning about how expensive stolen art is exchanged as a proxy for cash from "This is a robbery" on Netflix I started to wonder if laundering is really needed with crypto. There are probably clever ways to just exchange wallet ownership instead.

Laundering is needed if you want to (enable the people you trade with to) ever spend the black-market money on white-market goods.

Without that, your trading partner ends up holding a "dirty" wallet — just as if you gave them a suitcase full of marked bills.

That wallet still holds value — all dirty money does — but it's a lot less value than cleaned money.

Databases of stolen credit card numbers sell for not-much money. It's not just because you need stuff set up to drain the cards; it's because the money you drain from the cards is dirty. The dirty money is worth only about as much as the database itself. It's when you clean it that it attains "face value."

Re: The rise of crypto laundries: how criminals cash out of Bitcoin

#169

Post by vmception »

m00dy wrote: post #13

I can tell one of the ways that is missing in the article. Let's say, you have a lot of Bitcoins and your buddy is a bitcoin miner. You craft your transaction such a way that you put all your coins as transaction fee. You send your transaction only to your buddy. Your buddy picks it up and solves the puzzle afterwards. Fees will be converted to brand new coins.

It will literally be international news (in crypto circles) when a transaction like that gets mined.

People frantically contact all the mining pools to see who mined it and if they will return the funds to the sending address.

This has happened many times and they usually do return it, because people have nearly universal consensus that it was a mistake.

Kind of not a great way because it is too conspicuous.

There was one time this happened that was interesting and intended to be conspicuous:

Some hackers got access to an exchange, but the exchange had some pretty good security and would not let them withdraw large amounts, but the hackers could set the transaction fee. So they started burning all the exchange's money by distributing them to miners with this high transaction fee, to let the exchange know they were serious and needed their demands met.

Could they have coordinated with a miner and nobody would be the wiser? Sure.

Re: The rise of crypto laundries: how criminals cash out of Bitcoin

#170

Post by vmception »

ccity88 wrote: post #14

I get that money laundering is always linked to criminal activity, but how have we always just accepted the lack of personal privacy when it comes to finance? Privacy is a feature, not a bug; and whilst crypto may not be the way forward, I hope one day we can reach a solution that has both privacy and also safety. The language used by law enforcement is quite alarming, it suggests that they should be privy to ALL tra…

> I get that money laundering is always linked to criminal activity

Its not. Well, by definition it is but it is paradoxical. Money obfuscation is not illegal, but when the source of the money is illicit then money obfuscation is money laundering, but successful money laundering means nobody can ever distinguish between a licit or illicit source, and it is up the accuser to prove the source was illicit, which should be impossible. (Whether there are records or not, there should be no probable cause to receive or act on those records at the standard needed for a criminal investigation)

So, only unsuccessful money laundering is linked to criminal activity, and deterrence relies on stigmatizing all money obfuscation.

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