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Over $300M cryptocurrency laundering has took place through Bitcoin mixers
While the decentralization of Bitcoin allows many people to transfer assets without fear of censorship, bad actors are also using the network's intrinsic anonymity to move stolen monies.
Tornado Cash was a popular alternative for hackers to launder stolen cryptocurrency before it was sanctioned by the United States Treasury Department's Office of Foreign Assets Control (OFAC) in 2022. Since 2019, more than US$7 billion in crypto assets have been laundered using the mixer, according to OFAC. However, recent research from blockchain security startup CertiK indicates that there will be a shift in 2023.
CertiK data indicates that more than US$300 million in stolen earnings from 50 of 2023's top attacks ended up in Bitcoin, as hackers seek new locations to move their ill-gotten wealth following growing governmental scrutiny of Tornado Cash.
Crypto mixers are protocols designed to keep cryptocurrency transactions confidential. To anonymize transactions between wallet addresses, the programme combines potentially identifiable payments with large quantities of other currencies.
According to Joe Green, the leader of CertiK's rapid reaction team, although Bitcoin's decentralization and anonymity enable good users, malevolent actors may also utilize it to their advantage. Green elaborated:
The Bitcoin ecosystem is home to several privacy mixers that cater to both privacy-conscious users and those with malicious intent. While this scenario poses a problem, it is critical to recognize it as an inherent feature of decentralized systems.
The shift towards Bitcoin (BTC $42,905) mixers indicates that criminal individuals are attempting to avoid Tornado Cash because of governmental fines. CertiK's study revealed that in 2023, the famed crypto hacking gang Lazarus used Bitcoin mixers like Sinbad, which was sanctioned and shut down by US authorities.
Bitcoin mixers, according to CertiK, use a distinct method of anonymizing transactions. The mixer, such as Tornado Cash, obscures the relationship between the sender and the recipient. However, the user may only withdraw the amount they put into a new wallet, less a charge.
Bitcoin mixers are services that allow users to hide the source and destination of their cryptocurrency transactions by mixing them with other transactions. They are often used by criminals to launder money that they obtain from illegal activities, such as hacking, drug trafficking, or ransomware.
According to the U.S. Department of Justice, Larry Dean Harmon, the operator of the darknet-based Bitcoin mixer Helix, pleaded guilty to laundering more than US$300 million worth of Bitcoin from 2014 to 2017. He admitted that he knew that his customers were using Helix to mix proceeds from darknet markets and other illicit sources. He also partnered with several darknet markets, such as AlphaBay, Evolution, and Cloud 9, to provide his money laundering service to their user.
Harmon forfeited more than 4,400 Bitcoin, worth more than US$200 million at current prices, and other items that were involved in the scheme. He faces up to 20 years in prison, a fine of US$500,000, or twice the value of the property involved in the scheme, a term of supervised release of not more than three years, and mandatory restitution.
Bitcoin mixers, on the other hand, allow users to deposit Bitcoin and disperse it in variable percentages across numerous wallets, complicating monitoring even more.
While Tornado Cash remains a "go-to" mixer for smaller-scale cybercrime, CeriK said that instances over $50 million or more are increasingly turning to Bitcoin-based laundering solutions. CertiK feels that this is a pattern and a foreshadowing of the crypto space's future issues.
As crypto laundering strategies expand, more dynamic countermeasures in the fight against blockchain-based financial crime are urgently needed. Green elaborated:
"Perhaps the most effective countermeasure is the comprehensive tracing of 'dirty' funds movements." Sharing information with appropriate parties, such as exchanges, is also a crucial step."
Furthermore, the security expert feels that stakeholders must be informed of the strategies used by thieves to counteract them.