Bitcoin is used for drugs and gun trading
Bitcoin is used for drugs and gun trading. That is true. Cash is used for drugs and gun trading. That is also true. Diamonds are used for the drugs and gun trading. That is also true.
Diamonds are used for the drugs and gun trading
You have to accept one thing: There have always been and always will be a drugs trade, gun-running and even human trafficking. These terrible industries exist just the same as all other illegal enterprises like black-market cigarettes, which keeps tobacco tax from the state, sales tax fraud, criminal activities within the category of so-called “white-collar crime,” and other forms of commercial criminality
Even serious crimes, like capital crime, will not disappear
People will continue to be defrauded, mugged, robbed, blackmailed, kidnapped and murdered. Nothing can be done about that, other than to forbid it by law and get the police to detect these crimes, catch the criminals and bring them before the courts.
All of these crimes have something in common; in all cases, the transfer of assets plays a significant role.
In most cases, it comes down to one thing: the criminal wants money. States and the police want to prevent crime, or at least detect it. Following the trail of money was always a good approach to solving most crimes. The exceptions to this are mostly crimes of passion, which are typically not motivated by greed, but spurned love or jealousy. These crimes, however, are usually easier to solve because the circle of suspects is generally very small and socially close to the victim. For most criminal enterprises, the money trail is key to solving the crime..
The Money Trail
Criminals and fraudsters are always thinking up new methods for transferring money to hide the money trail. Because of the assumed anonymity, a cryptocurrency is of interest to the criminals of this world as a transit route for money. They believe — or, at least, they once believed — that they could be paid in Bitcoin without there being any trace of the money that the crime detection agencies could follow. They were way off-mark.
The openly accessible blockchain, the Bitcoin public ledger, in which every transaction — every single one from the very beginning — is recorded, is actually the best way to track money. Kathryn Haun, an ex-state attorney and lecturer in cybercrime and cryptocurrency at Stanford University, is a big fan of the Bitcoin blockchain, because
“in the end it turned out that the blockchain can support the good guys more than the bad guys.”
It was Haun who led the investigations against the dark-web website “Silk Road”, after the initiator and operator of this site, a man named Roos Ulbricht, met his doom. In the summer of 2017, the “life” sentence in his case was finally confirmed by a US court. Life! The court justified the verdict with statements reflecting that even though the hired hitman had betrayed him, his intention had been clear to see. In the next section, we’ll learn more about this historic case.
An Exciting Story: Darknet, Bitcoin, Murder and Homicide
It was possible to buy nearly anything on the Silk Road website. While it was mostly drugs for sale, nefarious types could also purchase child pornography, forged documents, stolen credit card numbers and weapons. It was even possible to hire contract killers, which the aforementioned Roos Ulbricht also tried for himself. This made for one of the wildest criminal stories of recent years.
The story that follows is one that was only possible because of the blockchain.
In the beginning, those involved in criminal enterprise mistakenly believed that using Bitcoin was completely anonymous. What they failed realize is that this is not entirely the case; the use of Bitcoin is not what could be termed truly anonymous because it does in fact use pseudonyms.
This means that those involved can be identified under some circumstances, and every transaction is recorded for all time without any gaps. This creates an advantage for law enforcement agents who can see the entirety of the chain, which is an unalterable history of every single transaction in the Bitcoin blockchain. On the one hand, Bitcoin had provided the payment traffic for illegal products but on the other, it had made it possible to identify and catch these criminals. Does this mean the blockchain is good or evil? In any case, this new technology has provided the perfect setting for a whole lot of exciting stories.
The State Attorney’s Tale
Kathryn Haun is the (former) state attorney who led the Silk Road investigations. “Any technology worth using is used by criminals first. Criminals are the ideal beta testers for new technologies,” she said at the TED conference in San Francisco in the autumn of 2016.
“The digital currency, Bitcoin, and the blockchain technology connected with it makes no difference there. It helped drugs dealers to sell their drugs on the dark net. […] In the end, it turned out that the blockchain can support the good guys more than the bad guys.”
Haun is a big fan of the blockchain because, in this case, it made her job easier. She has been working for more than ten years in crime detection and has put murderers, members of organized criminality, cartel gangsters, commercial criminals and cybercriminals behind bars.
At first, Silk Road was a difficult problem for the US authorities to solve. That is why a cross-agency special unit was established in which agents and specialists worked closely with various relevant authorities. Together, they hunted the mysterious operator of the website who hid behind the pseudonym “DPR” (Dread Pirate Roberts).
An Undercover Agent is Infiltrated
Because the Silk Road website was being operated on the dark web, and the known technologies for finding the base of operation failed, the agents drew up a plan for getting to the operator with an infiltrated agent. One of their men was to infiltrate and win the confidence of this operator and administrator, the anonymous DPR. In 2013, this role was taken on by an agent who became active in the marketplace under the pseudonym “NOB.”
That year was no bed of roses for the DPR because he found himself in the situation of being blackmailed, something that is not uncommon when you deal with criminals. He received threats via his own website from somebody hiding under the pseudonym “Death from Above.” Death from Above wanted hundreds of thousands of dollars for DPR’s silence, and if he didn’t pay, his true identity and location would be revealed to the police. This was not a good situation for DPR.
But that was far from all the trouble stirring. Another user with the name “French Maid” offered DPR insider information from the investigation team, so that he would at least know where the authorities were and what they knew. This information came with a hefty price tag — hundreds of thousands of dollars — all payable in Bitcoin, of course.
Suddenly, in the summer of 2013, the Silk Road website was hacked. It was discovered that another bad guy had managed to break into the website and had stolen 21,000 Bitcoins from the Silk Road servers. The Bitcoin rate was undergoing strong fluctuations at the time, but the damage was estimated at around $25 million.
DPR found himself under enormous pressure. To start with, the lost Bitcoins did not actually belong to DPR but to his traders, who now discovered that their trading accounts on Silk Road had been completely emptied. He acted very quickly, using all the means at his disposal to find out exactly what had happened and even managed to identify the hacker.
However, it turned out that is was not in fact a hacker who was responsible for the stolen Bitcoins. It was one of DPR’s own employees, a man named Curtis Green, who had administrator rights — unrestricted access — to the servers. Green had withdrawn the 21,000 Bitcoins, sending DPR into a spiral of rage. He was so angry about the betrayal that he decided to have the traitor murdered.
The Contracted Killer
DPR turned to a user he trusted and asked if someone could take Green out. It was his bad luck that person he asked was NOB, the undercover agent from the task force.
But there was another thing that DPR didn’t know, and that was that Curtis Green was in fact now working with the task force. Green had handed over his access to the system, including his passwords and login details, giving the authorities his access to the Silk Road servers. But even Green only knew DPR under his nom de guerre and he could not identify the servers or DPR himself in the dark net, nor could he identify their location. He could only administrate.
NOB knew that Green had stolen the Bitcoins and agents had been immediately dispatched to grab Green and place him in protective custody. But it could not have been Green who had stolen the Bitcoins. After all, he had a cast-iron alibi because he had already handed over his computer and access data to the task force and he was being closely monitored. At the time of the theft, he had no opportunity to do anything on the internet without the task force following his every move, so it could not have been him at all.
However, NOB’s murder contract from DPR had to be accepted and fulfilled to give the task force agents a stronger lead to follow on DPR’s trail. The authorities forged a series of pictures showing how Curtis Green was tortured and then a few showing his seemingly dead body. The state prosecutor did not show these pictures and did not say how DPR came by these pictures, and he was later arrested in New York. Exactly how that was done is probably still classified. It transpired that DPR was a man have named Ross Ulbricht. He was arrested, tried, and sentenced to life without parole.
This story is one that could never have happened without cryptography, upon which the dark net was constructed, or without peer-to-peer networks, which are also a significant foundation of the dark net, or without cryptocurrencies, in this case, Bitcoin. It was the perfect storm of factors that came together to not only take down a powerful and destructive website, but also reveal the identity of a supposedly unidentifiable person.
So, all’s well that ends well? The bad guy was stopped and put behind bars. But, hold on! What exactly happened to the stolen $25 million?
Along with the approximately $25 million in Bitcoins that had disappeared and the other criminals who had used Silk Road for their businesses, the investigators were particularly interested in the two other major actors in the scene: Death from Above and French Maid.
In spring of 2014, the state prosecutor got a tip-off out of the blue, one that prompted a new chapter in this strange and exciting story. The tip-off itself had nothing to do with Silk Road, and the source of the tip is not publicly known.
He hadn’t thought about the Blockchains main features
She was informed that NOB, the undercover agent contracted for the murder, was suddenly transferring lots of Bitcoins. Much more than his salary as an official would ever allow. In fact, he was moving Bitcoins to the tune of several hundred thousand dollars each month. The source also said that NOB was using his status as a criminal official to force the cryptocurrency exchanges he was using to delete the records of his transactions in their regular ledgers. He blackmailed them and threatened them with sanctions by the police and other authorities if they did not follow his instructions.
He had, however, failed to fully understand the power of the blockchain and its basic function. In a public Bitcoin blockchain, all transactions ever made, from the inception, are recorded without gaps and unalterably. That is the reason for the success of the Bitcoin blockchain. If the public ledger was not on the peer-to-peer network of many thousands of nodes, the blockchain would not be secure and he would probably have got away with his deception. But all the entries in the public Bitcoin blockchain are copied and confirmed on many thousands of nodes. All his activities could be seen and his pattern uncovered.
The Public Ledger Reveals the Truth
The investigators took this tip and got busy investigating where NOB had got the many Bitcoins from and what he was doing with them. Although Kathryn Haun didn’t say so explicitly, it is safe to assume that it was other criminal officials in a different department, the famed and hated Internal Investigations, who were tasked with investigating their colleague.
Through an analysis of the Bitcoin blockchain, in which the transfers to individual wallets were placed in relation to each other and one or some wallet addresses were known to be used by NOB, all the connected transactions could be discovered. To their astonishment, they uncovered that NOB was not just the NOB in the Silk Road scene, but he was also the person blackmailing Ulbricht, or DPR as was then known. Up to this point, the blackmailer was known by the name of Death from Above. So, the good guy turned out to be a bad guy — and a very bad one at that.
With the help of the public ledger of the Bitcoin blockchain, it was also proven that NOB — or Death from Above — was also the user behind the name French Maid. Investigators were shocked and amazed that this undercover-agent-turned-criminal had been able to pull off so much deception right under their noses. Their agent had been playing three roles simultaneously: he was the federal agent trying to catch DPR, he blackmailed DPR with the threat that he would identify him, and finally, he had also sold him inside information from the investigation — all the same agent. However, only in the first of these endeavours, as NOB, was he working for the state. As Death from Above and French Maid, he was simply lining his own pocket. It is very likely that none of this deception would have ever come to light if the Bitcoin blockchain had not been publicly accessible to everyone, and had every single transaction not been permanently and unalterably recorded.
The Story Continues
Once the internal investigators were able to link this agent with other identities and the Bitcoin sales, it didn’t take long for him to be arrested. The state prosecutors had discovered a new form of evidence: The Bitcoin blockchain public ledger.
So, why not try to use the same technology to find the stolen Bitcoins that were transferred to NOB? Although it was possible to prove that NOB was French Maid and Death from Above, there was actually no trace in the ledger that connected the 12,000 stolen Bitcoins to him directly. Ulbricht hadn’t stolen from himself and it couldn’t have been his colleague Green either, that much had been proven beyond doubt by the investigators. Maybe the public ledger could be the key to solving this mystery too.
Through further analysis, the investigators were able to trace the missing Bitcoins to the Mt.-Gox exchange. While it had since ceased operations, the records and the wallets associated with the stolen Bitcoins could be used to identify a bank account located in the USA that belonged to an offshore company. That sounded like surprisingly conventional criminal methods, which is bread and butter for the authorities.
The final surprise was unveiled — to everyone’s great astonishment — when it was revealed that this offshore company belonged to another investigator on the Silk Road task force. This investigator was a Secret Service crypto expert. He had been present when Curtis Green handed his computer and passwords over to the task force, giving him everything he needed to pull off this crime.
The Secret Service agent used Green’s access data that very evening and transferred the Bitcoins to himself. So, Ulbricht had been right when he concluded that Green was the thief. It might not have been Green himself at the keyboard, but that cannot be proved electronically. It is possible to see whose account was used, but not exactly who was used the account if no webcam was running. It is, as you will by now realize, just a question of the private key. Whoever has that can send the Bitcoins.
What a story! A mysterious cybercriminal and two corrupt officials also playing their own game and committing crimes independently of each other — if that doesn’t show Bitcoin in a poor light, I don’t know what does.
The Police Should Also Use a Public Blockchain
Just consider how the world could change if the police could use a public blockchain as a record system, if chains of evidence could not be changed, if the hash of a witness statement was managed on a blockchain, if the movement of seized drugs and access to evidence was recorded in a public blockchain. Opportunity makes thieves, and unfortunately that also applies to officials, as can be seen in this real case. Even law enforcement officials are human, and humans become weak. Some become weak at $10,000, others only at $1 million or $20 million. But no one becomes weak when they can be certain that they be caught using the blockchain and will land in jail.
It can be assumed that a public blockchain will not just put a stop to such temptations but could actually be a bulwark against all types of corruption. A better world could be created with a public blockchain — and Silk Road is a fine example of the opportunities that this new technology brings with it.
This a short story out of my book
Bitcoin, Blockchain & Co.
The Truth, and Nothing but the Truth