The DOJ’s Crypto Dragnet Is Bigger Than You Think

Sargos 2021-08-17 17:01:40 +0000 UTC [ - ]

The United States' belief that its laws apply to everyone in the world is one of the most insidious ideas of our modern world. If one outcome of crypto is that the US loses this ability to police the world due to automated and unstoppable services becoming ubiquitous then history might look at this era as the turning point of a truly free global society.

tessierashpool 2021-08-17 17:25:22 +0000 UTC [ - ]

Russia and China have been doing the same thing, punishing dissidents living in other countries (and even their families, in China's case). Pretty much every country that has a plausible reason to believe they can get away with it embraces the idea that their laws apply anywhere they want them to.

I share your concern with this, but I don't think that crypto is likely to change anything in this area. Blockchains are fundamentally permanent, which makes enforcement easier, not harder. The wild west factor with crypto can't last forever; the nature of the technology works in the exact opposite direction.

quantumBerry 2021-08-17 17:11:18 +0000 UTC [ - ]

The idea that something is a crime if it is "accessible from the US" is truly a contortion of justice. If you take $5, walk across the mexican border, and then buy an antibiotic labeled for use in humnans -- is that a violation of US law because the Mexican pharmacy sold something that a US person could possibly access? What if that person used their Panamanian passport and not their US passport (VPN) to buy the antibiotics and the vendor could have never known they were a US national?

Once currency leaves the US it is absurd to claim anything that happens with it is US jurisdiction. If that is the case all Americans who paid taxes should be put on war trials for money sent as foreign aid to despotic regimes.

giantrobot 2021-08-17 17:40:51 +0000 UTC [ - ]

> If you take $5, walk across the mexican border, and then buy an antibiotic labeled for use in humnans -- is that a violation of US law because the Mexican pharmacy sold something that a US person could possibly access?

That's not how the law actually works though. The store in Mexico can't be accessed by someone in the jurisdiction of the US at the time of the transaction. There's no legal avenue for the US to pursue the Mexican store except negotiate with the Mexican government to extradite them.

Additionally most US laws have "knowingly" clauses. While you can be charged for committing a crime it's up to the state your actions met every clause of the laws. So even if on the off chance the US was able to extradite your Mexican shop owner they would need to prove the shop owner knowingly committed the act.

quantumBerry 2021-08-17 18:01:29 +0000 UTC [ - ]

And the mixer can't be accessed by dollars currently in the US, only by crypto that has been transmitted overseas via propagation of the blockchain. The mixer isn't sending dollars across the border to the US, and for blockchain based crypto that requires the blockchain to be propagated across the border, likely by a completely unknowing 3rd party even if the mixer operator doesn't wish for persons on US soil to have access to the blockchain.

Furthermore Tornado never responded to the e-mail so it's not clear they were aware the undercover claimed they had criminal intent. It's quite possible the e-mail was never read. Desiring privacy isn't a crime, and that's a very legitimate use of mixers. Not to mention if you have cash in your wallet you're mixing and trading them all of the time, and most certainly you are at some time unwittingly laundering formerly dirty cash.

So your statement really just emboldens the insanity of the claims of the DOJ.

booleanbetrayal 2021-08-17 17:22:39 +0000 UTC [ - ]

If value from an illicit transaction is ever diverted back into dollars, then it becomes the purview of US officials. I'm assuming that loop had been closed more than once with this mixer.

quantumBerry 2021-08-17 17:39:13 +0000 UTC [ - ]

Considering the the transactions happened overseas and we have no evidence they were prosecuted by overseas authorities, there's quite a bit of doubt whether the transaction were illicit in anything except the imaginary scenario that these transacions happened in the US (they did not). There doesn't appear to be prosecution in this case of exchanging for fiat back in the US so there's no prosecution for the on-soil "closing of the loop" you so mention. We all know many foreigners are buying real estate here in the US with dollars to evade capital controls in places like China, and this is actually happening on US soil, why isn't the DOJ focused on this?

That's also quite the assertion that anything that happens with dollars is in the "purview of US officials." from a practical perspective you are correct but its conclusion is rather odious. If this were actually true and US dollars are the reason for jurisdiction then we both know launderers would all just use Euro or something else instead 100% of the time. Yet they don't, because pragmatically it makes little differenc as US would pursue their enemies all the same whether they transact in Euro or Dollar -- the dollar in this case is simply an excuse.

wisemanwillhear 2021-08-17 18:22:28 +0000 UTC [ - ]

> The United States' belief that its laws apply to everyone in the world is one of the most insidious ideas of our modern world.

That's not a modern thing. Countries with power use that power to get what they want, whether through military force or though other forms of influence and/or coercion. The Sumerians, the Egyptians, the Assyrians, etc.--pretty much every country with military or economic power over other countries.

DennisP 2021-08-17 17:38:16 +0000 UTC [ - ]

Worth noting that because all transactions are public, mixers aren't only for hiding from the government. They're also for hiding from the general public. Generally when you make a small purchase you don't tell the store what your bank balance is, but with crypto you do...unless you use a mixer (or a privacy coin that effectively has mixing built in).

The other way is to use a centralized exchange as your "mixer," which is transparent to the government but imposes extra fees and adds counterparty risk.

Corporate use of public blockchains will almost certainly require privacy technologies, to avoid giving information to competitors.

w4llstr33t 2021-08-17 18:35:38 +0000 UTC [ - ]

I like crypto but the way I read this is that it's a good number of the reasons that the existing financial infrastructure is better (particularly once the US infrastructure updates to things like instant FedNow payments).

I think defaulting to using a mixer would be inconvenient and it could get folks flagged for even using it at all.

Also, what ever happened to not re-using addresses? I know it doesn't make it totally private, but I thought it helps some, since you'd still have to tie addresses to identities somewhere in the chain.

DennisP 2021-08-17 18:48:51 +0000 UTC [ - ]

If you just top off your spending wallet occasionally, it doesn't necessarily have to be more inconvenient than visiting an ATM, or paying your credit card bill if you don't have it drafted automatically.

Seems to me that "getting folks flagged" for doing something innocent is a flaw in our government, more than a flaw in crypto.

Not reusing addresses helps against casual inspection but with blockchain analysis these days, it's long obsolete as any sort of real privacy measure. It wouldn't be something corporations could use to protect competitive information. Also it's not useful at all on account-based chains like Ethereum.

rini17 2021-08-17 11:58:42 +0000 UTC [ - ]

"...if you did something bad 10 years ago you can be caught and arrested for it today".

There is no period of limitation? And what is "something bad"? For example someone 10 years ago, accepted bitcoin in exchange by paying fiat pizza delivery to an US citizen, is that classifiable as money laundering?

elliekelly 2021-08-17 13:17:39 +0000 UTC [ - ]

For most financial crimes in the US the federal statute of limitations is 10 years. There’s also a “knowledge” element to the crime of money laundering. So let’s say someone sold a pizza for bitcoin a decade ago and it just so happens that bitcoin was obtained through unlawful conduct. Now the pizza seller might have technically, arguably, “laundered” the funds but as long as the pizza seller didn’t know the bitcoin was from criminal activity the pizza seller didn’t commit the crime of money laundering. They lacked the requisite criminal intent.

This knowledge element is why the FBI’s email to Tornado is critical to the case. The agent specifically told Tornado the funds were obtained through illegal means so the DOJ can demonstrate Tornado had actual knowledge of the purpose of the transaction: structuring rather than privacy. (In theory at least. According to the post the email was never acknowledged or responded to.)

MagicWishMonkey 2021-08-17 15:43:01 +0000 UTC [ - ]

Yep, the FBI is unlikely to nail you to the wall for doing something inadvertantly (unless it was really really bad).

A friend of mine is a field agent who spent years prosecuting financial crimes, and a lot of her time was spent knocking on doors and telling people to stop doing stupid stuff. Like one lady in particular was elderly and kept getting taken advantage of by money launderers (people putting cash in her account and telling her to deposit it somewhere else). My friend had to visit her on multiple occasions to explain that she needed to stop doing that.

Verdex 2021-08-17 16:50:30 +0000 UTC [ - ]

"This is really blatant money laundering? How are you planning on beating the FBI?"

"Seriously? Oh, I'm old and confused and this nice young gentlemen on the telephone called me and said he accidentally put a bunch of money into my account that was supposed to go to his mother. Such a nice boy. Just keep up your side of the deal. If my cut isn't in the Cayman account within the week, then I can guarantee that you won't be worrying about the FBI."

EDIT: Just to be clear. I'm hoping that we don't unknowingly live in a universe where all elderly people are secret underworld mob bosses. However, I'm honestly not sure how you would tell the difference between a sufficiently proficient elderly mob boss and someone who's just old and hasn't kept up with changing trends.

MagicWishMonkey 2021-08-17 17:26:13 +0000 UTC [ - ]

haha, that scenario definitely crossed my mind when I heard about it, but she's not an idiot (my friend) - I assume they had other reasons to think the lady wasn't all there, but I didn't ask.

Prior to working in financial crimes she spent a lot of time dealing with catching drug dealers/smugglers/cartels, which I think is where most agents go to cut their teeth, so she's heard pretty much every ridiculous excuse/justification you can imagine.

nostrademons 2021-08-18 03:26:15 +0000 UTC [ - ]

Bitcoin Fog, not Tornado. To my knowledge there's no case against Tornado. It's doubtful that there'd be any point to one - Tornado is just a smart contract on the Ethereum blockchain, so it will exist as long as the blockchain exists, and putting its developers in jail is not going to change that.

jl2718 2021-08-17 13:42:09 +0000 UTC [ - ]

Does Tornado.cash even have the ability to block transactions?

elliekelly 2021-08-17 15:09:55 +0000 UTC [ - ]

I have no idea but from a legal perspective I don’t think it’s relevant to the question of whether or not they’ve committed the crime of money laundering. Although I’m not sure anyone has tried the “my algorithm is beyond of my control” defense yet?

dannyw 2021-08-17 15:45:38 +0000 UTC [ - ]

There exists code that functionally cannot be deactivated, disabled, or removed on the blockchain (Uniswap is a good exmaple, no admin keys). Let's say the SEC prosecutes Uniswap Labs for running a securities exchange. What they cannot do, and what no one can do, is shut down the underlying code behind Uniswap.

2021-08-17 16:59:45 +0000 UTC [ - ]

FDSGSG 2021-08-17 20:17:29 +0000 UTC [ - ]

Are you sure that you aren't confusing Tornado with Bitcoin Fog?

elliekelly 2021-08-18 03:44:07 +0000 UTC [ - ]

I’m too late to edit but you are indeed correct, thanks!

ac29 2021-08-17 16:22:45 +0000 UTC [ - ]

There is no statute of limitation on civil tax fraud in the US. There is a limitation on criminal tax fraud, but for example, filing a false return to evade taxes (such as by not reporting cryptocurrency related capital gains) is a civil matter and the IRS is unrestricted in being able to attempt to collect the correct amount of tax at any point in time.

edit: see https://www.law.cornell.edu/uscode/text/26/6501 for the exceptions.

davidgerard 2021-08-17 13:34:44 +0000 UTC [ - ]

There is a statute of limitations. But in the general case: if you're going to do crimes, it's probably not so smart to do them on a permanent immutable public ledger of all transactions.

jmnicolas 2021-08-17 15:47:52 +0000 UTC [ - ]

The "crime" might be you made a modest profit on some crypto and "forgot" to report it to the IRS.

dboreham 2021-08-17 15:52:35 +0000 UTC [ - ]

That's a non-air-quotes crime. But the statute of limitations is 10 years.

quartz 2021-08-17 18:47:46 +0000 UTC [ - ]

For a modest unreported profit, assuming you converted it back to USD at an exchange that reports to the IRS, you'll probably get a CP2000 in the mail many years later with your recalculated back taxes (probably assuming a $0 cost basis that you'll have to provide records to dispute) + interest.

davidgerard 2021-08-17 21:26:21 +0000 UTC [ - ]

yes, that is indeed a crime, and not a "crime".

rafale 2021-08-17 13:16:21 +0000 UTC [ - ]

You are protected by the Statue of Not Worth It. Stay small. Fly under the radar. You are not gonna make them famous or advance their career.

piyh 2021-08-17 14:32:20 +0000 UTC [ - ]

Until you write a critical article on someone important or sleep with a cybercrime guy's wife. There is no under the radar in big data, you are present and accounted for by default.

Scoundreller 2021-08-17 14:47:17 +0000 UTC [ - ]

With big data, everyone is the list. It still matters where you rank on it, but instead of just the top10 being fairly accurate, the top8b is fairly accurate.

dannyw 2021-08-17 15:47:02 +0000 UTC [ - ]

Alternatively, donate to political candidates, spend a few thousand dollars on events and fundraisers. Meet and greet, just to get your name out there.

If you ever face criminal troubles, you might have someone in power who you can call. And they might make a call to the DA or field office, and they may have a change of mind.

Clubber 2021-08-17 16:35:15 +0000 UTC [ - ]

Dunno why this was downvoted. This is how things tend work when humans are involved.

jmnicolas 2021-08-17 15:46:10 +0000 UTC [ - ]

> You are protected by the Statue of Not Worth It.

It can be automated and fined. This is why I'm totally against central band digital currencies, the potential for abuse is tremendous.

2021-08-17 15:43:05 +0000 UTC [ - ]

encryptluks2 2021-08-17 16:27:14 +0000 UTC [ - ]

Note often statute of limitations often does not begin until discovery or "when the plaintiff has a complete and present cause of action.", and if they can't charge you criminally then that discovery rule may apply to civil or state law.

ashtonkem 2021-08-17 14:43:40 +0000 UTC [ - ]

Statue of limitations might apply.

tromp 2021-08-17 15:14:42 +0000 UTC [ - ]

Seinfeld covered that: https://www.youtube.com/watch?v=iq8gfaFqFpI

legrande 2021-08-17 16:29:16 +0000 UTC [ - ]

Mixers and coin tumblers could very well be honeypots. Want to easily see who has dirty money? Setup a mixer and find out!

throw10002671 2021-08-17 16:54:49 +0000 UTC [ - ]

Privacy is a thing that people legitimately desire as well. You don’t tell your neighbors about the valuables in your home. If I acquire BTC to hold long term, it’s in my interest from an opsec perspective to keep it secret, keep it safe.

lisper 2021-08-17 16:52:28 +0000 UTC [ - ]

Password managers and E2E comms apps as well. If I were running a government surveillance program it's a total no-brainer that one of the things I would do is develop and publish world-class versions of both of these, though obviously concealing the fact that they were connected to government surveillance from the users, and probably most of the developers as well.

colinmhayes 2021-08-17 16:38:26 +0000 UTC [ - ]

Tornado is open source. You can go check if its a honeypot if you're worried.

capnorange 2021-08-17 16:52:29 +0000 UTC [ - ]

Maybe. Most popular mixers are now open source, wasabi, samourai, tornado.cash

matheusmoreira 2021-08-17 15:45:15 +0000 UTC [ - ]

Bitcoin traceability is old news. Nothing written on this article applies to Monero.

ajkdhcb2 2021-08-17 16:07:12 +0000 UTC [ - ]

Pretty low quality article that doesn't consider such things, or the concept of fungibility and private protocols compared to mixing, or the history of how money was always expected to be fungible so this modern culture is unusual, etc... so many things to say, and so few people that are aware

Seems like a propaganda piece since it speaks entirely as mixing=bad. Would ask the author how he would feel about publishing all his bank statements publicly online, and if he would feel safe having address leaked and large crypto holdings that were public

hluska 2021-08-17 17:12:34 +0000 UTC [ - ]

The author was open about both how little they know and how these articles are about their learning. Sorry bud, but if you read that disclaimer at the beginning, read the whole article and still have this complaint, I have zero sympathy for you.

They warned you in advance. Why shit on them?

ajkdhcb2 2021-08-17 17:14:11 +0000 UTC [ - ]

You're right, I forgot about the first paragraph by the end, my bad. Still this is shared and people are reading it, so it is colouring people's view in a disappointing way. Communications have an impact on the world and people should take responsibility for what they say

hluska 2021-08-17 17:33:47 +0000 UTC [ - ]

That’s true, but none of us emerge from the womb fully formed and ready to go. We all learn and grow. I’d 100% understand and agree with you if they tried to pass themselves off as an expert and published this article. But I respect people for having the modesty and respect to admit they’re just learning and like to file their contributions away accordingly. Heck, admitting you don’t know things is the first step to learning and learning is one of the best ways we can all make the world a slightly better place.

ajkdhcb2 2021-08-17 19:51:36 +0000 UTC [ - ]

I wouldnt be able to write anything if I worried too much about regretting what I wrote, so I agree

matheusmoreira 2021-08-19 01:54:06 +0000 UTC [ - ]

> They warned you in advance. Why shit on them?

The author's insulting clickbaiting headline does them no favors. If the author knows so little, maybe they shouldn't be telling people they're thinking wrong.

blantonl 2021-08-17 15:57:53 +0000 UTC [ - ]

Problem is you might show up on the radar when you exchange Bitcoin or Fiat for Monero.

shapefrog 2021-08-17 17:11:32 +0000 UTC [ - ]

> The DOJ’s Crypto Dragnet Is Bigger Than You Think

I 'think' their dragnet is bigger than this article thinks it is.

chelmzy 2021-08-17 16:01:11 +0000 UTC [ - ]

It is funny how slow and steady Monero adoption as been. It gets very little coverage on most platforms.

bananapub 2021-08-17 16:04:56 +0000 UTC [ - ]

because almost all of the cryptocurrency world is there for the ponzi scheme grift side of things, not because they want a functional payments system or anonymity.

robot_no_419 2021-08-17 17:13:19 +0000 UTC [ - ]

Monero is one of the few currencies that focuses on the core project of a decentralized payments system. Go to their subreddit and you'll see they have a strong culture of discouraging price discussion and focusing on the technology.

quantumBerry 2021-08-17 17:29:47 +0000 UTC [ - ]

I would argue that is more of a function of their low market cap (lack of retail "investors" who have no practical use for monero) which really only leaves developers, those who have a lot to lose (potential prison), those passionate for privacy (who's primary goal is not deflationary value) and the intellectually curious. If monero catches on the democratic balance tips towards retail investors and the discussion will focus on price. This also applies to reddit as a whole which has become lower and lower quality as mainstream culture has accepted its common use.

robot_no_419 2021-08-17 18:11:51 +0000 UTC [ - ]

Absolutely, 100%. I agree with everything you said and I rue the day that Monero actually does become mainstream because it will cause many problems for the people just using it as an already functioning currency.

Proven 2021-08-17 16:23:46 +0000 UTC [ - ]

I know, it's 100% trace-proof!

> If users spend funds immediately following the lock time in the first 2 blocks allowable by consensus rules (~20 minutes after receiving funds), then there is a good probability that the output can be identified as the true spend.

https://www.newsbtc.com/news/monero/monero-bug-could-impact-...

paulpauper 2021-08-17 16:39:21 +0000 UTC [ - ]

Isn't there a statute of limitations

joelbondurant 2021-08-17 14:11:19 +0000 UTC [ - ]

Terrorist thug society thinks everything belongs to them, fucking communist parasites as a culture.