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Ohio Man Arrested For Running Bitcoin Mixing Service That Laundered $300 Million: The Risks and Bene



Using cryptocurrency intelligence tools including CipherTrace Armada, analysts were able to determine that one prominent US exchange received more than $3.5 million worth of bitcoin directly from criminal sources in 2020, despite strong KYC. However, this figure is only a small amount of the criminally sourced funds that actually made it to the exchange; smart criminals will typically create distance between their illicit source of funds and their fiat off-ramp of choice. It is important to note that although the exchange received $3.5 million worth of BTC directly from criminally associated addresses, exchanges have no way of denying funds before they are received. Even if the exchange sent these funds back, the interaction will still be recorded on the blockchain.


While bitcoin ATMs have been known to service criminals and scammers in the past, the global regulatory landscape is tightening for crypto ATM operators. New legislation has been created in countries around the world specifically to regulate businesses that swap crypto for cash, requiring them to obtain KYC information on all transactions over a certain threshold. This KYC information gathering and record keeping is also a critical step in complying with Travel Rule regulations that crypto ATM operators must abide by. These regulations are critical for governments to prosecute and stop those using bitcoin to launder illegal funds.




Ohio Man Arrested For Running Bitcoin Mixing Service That Laundered $300 Million



Kvashuk attempted to hide the source of the stolen value by using a Bitcoin mixing service and then communicating to the IRS that $2.8 million in crypto assets flagged as passing through his accounts had been a gift from a relative. He filed a fake tax form to back up the false claim.


This action marked the first time that a Japanese court ordered the seizure of cryptocurrency. The funds in question amount to roughly 4.8 million yen ($45,000) in both XEM and bitcoin. Doi is expected to keep the funds safe until an official verdict is handed down.


On July 15, Twitter accounts for multiple high-profile cryptocurrency exchanges, public figures, and various entities were taken over by hackers promoting a bitcoin doubler scam. The scammers soon after began moving funds into cryptocurrency exchanges and mixing services.


On September 26, the Singapore-headquartered digital asset exchange KuCoin announced that it had detected large withdrawals of bitcoin (BTC) and ethereum (ETH) tokens to an unknown wallet beginning at 19:05 UTC the day prior, affecting roughly $150 million in user funds.


The US Department of Justice (DOJ) announced on Thursday that Larry Harmon, 36, of Akron, Ohio, has been indicted on three counts of allegedly running a Bitcoin mixer service called Helix from 2014 to 2017.


A cryptocurrency tumbler or cryptocurrency mixing service[1] is a service that mixes potentially identifiable or "tainted" cryptocurrency funds with others, so as to obscure the trail back to the fund's original source.[2] This is usually done by pooling together source funds from multiple inputs for a large and random period of time, and then spitting them back out to destination addresses. As all the funds are lumped together and then distributed at random times, it is very difficult to trace exact coins. Tumblers have arisen to improve the anonymity of cryptocurrencies, usually bitcoin (hence bitcoin mixer), since the currencies provide a public ledger of all transactions. Due to its goal of anonymity, tumblers have been used to money launder cryptocurrency.


Another alternative to mixing services are "privacy wallets", allowing users to exchange bitcoin in an untraceable manner using so-called CoinJoin transactions. Since no central server is involved, this eliminates the problem of a mixing server stealing money or acting as a law enforcement honeypot. In recent years, criminals have increasingly moved from mixing services to privacy wallets.[6]


In April 2021, U.S. Federal authorities arrested the founder of Bitcoin Fog, a Russian-Swedish man named Roman Sterlingov, on charges of money laundering, operating an unlicensed money transmitting business, and money transmission without a license in the District of Columbia. It was alleged that during its 10 years of operation, Bitcoin Fog laundered over 1.2 million Bitcoin at a value of approximately $335 million.[12][13]


Here's how it functions in greater detail: "Mixers work by allowing threat actors to send a sum of cryptocurrency - usually bitcoin - to a wallet address the mixing service operator owns. This sum joins a pool of the service provider's own bitcoins, as well as other cybercriminals using the service," Intel 471 says in a new report.


"The initial threat actor's cryptocurrency joins the back of the 'chain' and the threat actor receives a unique reference number known as a 'mixing code' for deposited funds," the company says. "This code ensures the actor does not get back their own 'dirty' funds that theoretically could be linked to their operations. The threat actor then receives the same sum of bitcoins from the mixer's pool, muddled using the service's proprietary algorithm, minus a service fee."


Some services only support bitcoin, but others will mix newer virtual currencies such as bitcoin cash, ethereum and litecoin. If monero and zcash are notably absent from that list, it's because experts say these two more privacy-preserving cryptocurrencies are already built to make them tough to track. Even so, some apparently scam cryptomixers that offer to mix monero regularly crop up.


Federal prosecutors alleged that Helix was used to launder more than 350,000 bitcoins - worth over $300 million at the time - in criminal profits from 2014 to 2017, including for darknet marketplaces such as AlphaBay, Evolution and Cloud 9.


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