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Maybe I don't know much about bitcoin, but can't you track the address where the bitcoins were being transferred to? Seems like it would be difficult to launder

Maybe I don't know much about bitcoin, but can't you track the address where the bitcoins were being transferred to? Seems like it would be difficult to launder that volume of bitcoin all anonymously where it can be tracked, to a certain extent, through the public blockchain?

omouse 8y ago
There are bitcoin tumblers, essentially the idea is to split up the transaction into multiple transactions of varying sizes to various addresses and to keep doing that in such a way that it doesn't look weird... Basically they try to hide the transaction among the huge volume of transactions going on, kinda like a VPN or Tor?
- stingraycharles 8y ago
  It’s important to note that it’s not just splitting up your own transactions, it’s that it’s actually other people’s coins that end up in your destination wallets. As such, it becomes very difficult to trace: techniques for doing this are similar to large scale deanonimization of Tor traffic, and involve large scale pattern analysis.
  - dumbfounder 8y ago
    So make public the addresses, give out a reward for proof of destination, and then let the cryptohacker community get after it. Kraken is offering $100k, we just need the addresses.
  - thaumasiotes 8y ago
    > It’s important to note that it’s not just splitting up your own transactions, it’s that it’s actually other people’s coins that end up in your destination wallets. As such, it becomes very difficult to trace It was my basically uninformed impression that the bitcoin blockchain consists of a series of transaction records that look like this: - Address xxxxx1x sends 10 bitcoins to address xxxxx2x; address xxxxx7x mints 25 bitcoins That is to say, the records show that balances increase and decrease, but there is no actual concept of a uniquely identifiable bitcoin (with, say, a serial number) -- there are only balances held by accounts. On this model, it isn't possible to say that other people's coins end up in your destination wallets. Is that not accurate? (The fact that you can divide one bitcoin into 100,000,000 satoshi also suggests that there's no such thing as an individual bitcoin...)
    - ttoinou 8y ago
      (The fact that you can divide one bitcoin into 100,000,000 satoshi also suggests that there's no such thing as an individual bitcoin...) Wouldn't it rather say "there is such a thing as a satoshi" ?
      - thaumasiotes 8y ago
        No, because my first argument still applies in full to satoshi. There are balances of satoshi, but no individual satoshi.
        g45y45 8y ago
        every satoshi can be traced from birth until unspent. There are most certainly individual satoshi. they live in UTXO's.
        lolc 8y ago
        This is not true. Say I have a wallet with two Satoshi, and I transfer one each to two different wallets. Then I transfer two Satoshi from those wallets to a new wallet. Which way did each Satoshi take? You can't say!
        thaumasiotes 8y ago
        It looks like it is true in a technical sense; a bitcoin transaction record specifies a prior transaction as its input, rather than specifying a source address. So as a purely formal matter, your example records will look like this in relevant part: T0885: 100 Satoshi from T0002 to address xxxxx0x # 1 wallet, 2 Satoshi T1001: 1 Satoshi from T0885 to address xxxxx1x T1104: 1 Satoshi from T0885 to address xxxxx2x # Each Satoshi moves to a separate new wallet T1300: 1 Satoshi from T1104 to address xxxxx3x T1400: 1 Satoshi from T1001 to address xxxxx3x # and then they recombine https://en.bitcoin.it/wiki/Transaction https://en.bitcoin.it/wiki/Transaction From that record, it's clear that one Satoshi moved from address 0x to address 3x by way of transaction 1001, and the other one did the same by way of transaction 1104. However, there is no instrumental difference between an address's balance from one transaction and its balance from another transaction, as the behavior of the address is controlled by the private key associated with that address, and two balances belonging to the same address necessarily share the associated private key. I'm not sure what this is supposed to accomplish.
- EthanHeilman 8y ago
  1. If the coins were moved through tumblers that would be detectable and highly suspicious. 2. Safely tumbling large quantities of coins is especially difficult. At this scale I would wager twenty dollars that blockchain analysis should be able to trace at least some of the coins with high confidence. 3. It is rumored that many tumblers are run by law enforcement.
  - godelski 8y ago
    Outside the sphere of crypto, this is called "washing" or "laundering" ("cleaned", etc. Anything along this line). "Laundering" is the legal term). Such acts are typically traceable, but generally fly under the radar. Once someone is aware that the money is being washed it is usually uncovered (AFAIK). Washing crypto would seem even more difficult because transactions are all accounted for. So I'd assume a cleaner would need to have random time variance in redistribution so collisions aren't found. But also, money has to be spent or converted, so that's a big way you could uncover it. Money is harder because cash is still a thing. 1) See that money is transferred from account to washer (instant flag) 2) Search for accounts associated with initial fraud and watch for extraction.
    - Scoundreller 8y ago
      The thing is, exchanges pool funds and users on exchanges do withdrawals all the time, and sometimes send to these services. The lack of an auditable cold wallet was a huge red flag. So was their multimillion ether loss (how would they cover that!?!?). But even with public cold wallets, the public doesn’t know how much crypto or fiat is owed to users.
    - Maxion 8y ago
      I work in crypto. Transactions can very much be traced. There's no trace of Quadrigas cold wallet holding any large sums of BTC. It's still a mystery what, exactly, did they do with customer funds. It'll be uncovered eventually once enough time has been given to forensic examiners to go through the transactions of the exchange.
  - csorrell 8y ago
- chelmzy 8y ago
  The FBI/private companies have specialized tools for tracking Bitcoins throughout their lifespan. All the data is out in the open so there is no hiding unless he converted to Monero anonymously.
  - stordoff 8y ago
    I was thinking you need a jump to cash somewhere, but even that would lead to _someone_. The coins can't just disappear.
  - ru999gol 8y ago
    considering Monero could you or someone elaborate on this a bit more? Maybe clarify if I'm misunderstanding something: 1) My understanding is, every transaction in bitcoin is public knowledge forever as part of the forever growing block chain. That is, there is no way to ever remove a transfer. 2) The only anonymity built in bitcoin is to hide your identity with pseudonymity, nobody necessarily knows your bitcoin address you are using. However if you are buying coins with credit card for example from person A and spend those at person B, person A will know that you have just spend that money at person B, and person B will know that you bought the coins from person A. 3) The only way(?) to hide, make the transactions anonymous is via tumbling, that is you send your coins into a huge account outside your control that aggregates maybe millions of $ from thousands of people and then sends them out again into random addresses. Nobody except the provider of the tumble service knows where your money went, making you anonymous, your money untraceable. I assume you want to repeat this process a few times with different tumble services. Is that correct? I'm no expert. Also with 3) how feasible is that with $130 million? I mean to successfully tumble wouldn't I need at least double the amount probably much much more? How large are the tumbles in services such as bestmixer.io? Also it seems to me that with enough heuristics even tumble services could potentially be traced back, this doesn't seem impossible to me?
    - g45y45 8y ago
      1. correct; 2. correct; 3. Kinda but Not quite the only way -- you can convert the values in the coins into another chain, ideally something like monero in which 1. applies, but 2. does not. (Monero uses a different transaction format called RingCT, it hides the true inputs/outputs among decoys and signs the set with a ring sig. It also hides the true amount transacted via Confidential Transaction encoding using a commitment and a range proof). Its much easier to tumble the value when the source/destination and magnitude is obscured. How feasible to do this with $130 million? Yesterdays trade volume for monero was 75 million (thus actual on chain tx's are much less). So it would take a while to do this without drawing attention. I don't have a lot of faith in pure bitcoin tumblers. Possibly scams or fraud. Im yet to see one that works as expected.
firethief 8y ago
That can be a difficulty but I imagine owning an exchange helps a lot

omouse 8y ago

There are bitcoin tumblers, essentially the idea is to split up the transaction into multiple transactions of varying sizes to various addresses and to keep doing that in such a way that it doesn't look weird... Basically they try to hide the transaction among the huge volume of transactions going on, kinda like a VPN or Tor?

stingraycharles 8y ago
It’s important to note that it’s not just splitting up your own transactions, it’s that it’s actually other people’s coins that end up in your destination wallets. As such, it becomes very difficult to trace: techniques for doing this are similar to large scale deanonimization of Tor traffic, and involve large scale pattern analysis.
- dumbfounder 8y ago
  So make public the addresses, give out a reward for proof of destination, and then let the cryptohacker community get after it. Kraken is offering $100k, we just need the addresses.
- thaumasiotes 8y ago
  > It’s important to note that it’s not just splitting up your own transactions, it’s that it’s actually other people’s coins that end up in your destination wallets. As such, it becomes very difficult to trace It was my basically uninformed impression that the bitcoin blockchain consists of a series of transaction records that look like this: - Address xxxxx1x sends 10 bitcoins to address xxxxx2x; address xxxxx7x mints 25 bitcoins That is to say, the records show that balances increase and decrease, but there is no actual concept of a uniquely identifiable bitcoin (with, say, a serial number) -- there are only balances held by accounts. On this model, it isn't possible to say that other people's coins end up in your destination wallets. Is that not accurate? (The fact that you can divide one bitcoin into 100,000,000 satoshi also suggests that there's no such thing as an individual bitcoin...)
  - ttoinou 8y ago
    (The fact that you can divide one bitcoin into 100,000,000 satoshi also suggests that there's no such thing as an individual bitcoin...) Wouldn't it rather say "there is such a thing as a satoshi" ?
    - thaumasiotes 8y ago
      No, because my first argument still applies in full to satoshi. There are balances of satoshi, but no individual satoshi.
      - g45y45 8y ago
        every satoshi can be traced from birth until unspent. There are most certainly individual satoshi. they live in UTXO's.
        lolc 8y ago
        This is not true. Say I have a wallet with two Satoshi, and I transfer one each to two different wallets. Then I transfer two Satoshi from those wallets to a new wallet. Which way did each Satoshi take? You can't say!
        thaumasiotes 8y ago
        It looks like it is true in a technical sense; a bitcoin transaction record specifies a prior transaction as its input, rather than specifying a source address. So as a purely formal matter, your example records will look like this in relevant part: T0885: 100 Satoshi from T0002 to address xxxxx0x # 1 wallet, 2 Satoshi T1001: 1 Satoshi from T0885 to address xxxxx1x T1104: 1 Satoshi from T0885 to address xxxxx2x # Each Satoshi moves to a separate new wallet T1300: 1 Satoshi from T1104 to address xxxxx3x T1400: 1 Satoshi from T1001 to address xxxxx3x # and then they recombine https://en.bitcoin.it/wiki/Transaction https://en.bitcoin.it/wiki/Transaction From that record, it's clear that one Satoshi moved from address 0x to address 3x by way of transaction 1001, and the other one did the same by way of transaction 1104. However, there is no instrumental difference between an address's balance from one transaction and its balance from another transaction, as the behavior of the address is controlled by the private key associated with that address, and two balances belonging to the same address necessarily share the associated private key. I'm not sure what this is supposed to accomplish.
EthanHeilman 8y ago
1. If the coins were moved through tumblers that would be detectable and highly suspicious. 2. Safely tumbling large quantities of coins is especially difficult. At this scale I would wager twenty dollars that blockchain analysis should be able to trace at least some of the coins with high confidence. 3. It is rumored that many tumblers are run by law enforcement.
- godelski 8y ago
  Outside the sphere of crypto, this is called "washing" or "laundering" ("cleaned", etc. Anything along this line). "Laundering" is the legal term). Such acts are typically traceable, but generally fly under the radar. Once someone is aware that the money is being washed it is usually uncovered (AFAIK). Washing crypto would seem even more difficult because transactions are all accounted for. So I'd assume a cleaner would need to have random time variance in redistribution so collisions aren't found. But also, money has to be spent or converted, so that's a big way you could uncover it. Money is harder because cash is still a thing. 1) See that money is transferred from account to washer (instant flag) 2) Search for accounts associated with initial fraud and watch for extraction.
  - Scoundreller 8y ago
    The thing is, exchanges pool funds and users on exchanges do withdrawals all the time, and sometimes send to these services. The lack of an auditable cold wallet was a huge red flag. So was their multimillion ether loss (how would they cover that!?!?). But even with public cold wallets, the public doesn’t know how much crypto or fiat is owed to users.
  - Maxion 8y ago
    I work in crypto. Transactions can very much be traced. There's no trace of Quadrigas cold wallet holding any large sums of BTC. It's still a mystery what, exactly, did they do with customer funds. It'll be uncovered eventually once enough time has been given to forensic examiners to go through the transactions of the exchange.
- csorrell 8y ago
chelmzy 8y ago
The FBI/private companies have specialized tools for tracking Bitcoins throughout their lifespan. All the data is out in the open so there is no hiding unless he converted to Monero anonymously.
- stordoff 8y ago
  I was thinking you need a jump to cash somewhere, but even that would lead to _someone_. The coins can't just disappear.
- ru999gol 8y ago
  considering Monero could you or someone elaborate on this a bit more? Maybe clarify if I'm misunderstanding something: 1) My understanding is, every transaction in bitcoin is public knowledge forever as part of the forever growing block chain. That is, there is no way to ever remove a transfer. 2) The only anonymity built in bitcoin is to hide your identity with pseudonymity, nobody necessarily knows your bitcoin address you are using. However if you are buying coins with credit card for example from person A and spend those at person B, person A will know that you have just spend that money at person B, and person B will know that you bought the coins from person A. 3) The only way(?) to hide, make the transactions anonymous is via tumbling, that is you send your coins into a huge account outside your control that aggregates maybe millions of $ from thousands of people and then sends them out again into random addresses. Nobody except the provider of the tumble service knows where your money went, making you anonymous, your money untraceable. I assume you want to repeat this process a few times with different tumble services. Is that correct? I'm no expert. Also with 3) how feasible is that with $130 million? I mean to successfully tumble wouldn't I need at least double the amount probably much much more? How large are the tumbles in services such as bestmixer.io? Also it seems to me that with enough heuristics even tumble services could potentially be traced back, this doesn't seem impossible to me?
  - g45y45 8y ago
    1. correct; 2. correct; 3. Kinda but Not quite the only way -- you can convert the values in the coins into another chain, ideally something like monero in which 1. applies, but 2. does not. (Monero uses a different transaction format called RingCT, it hides the true inputs/outputs among decoys and signs the set with a ring sig. It also hides the true amount transacted via Confidential Transaction encoding using a commitment and a range proof). Its much easier to tumble the value when the source/destination and magnitude is obscured. How feasible to do this with $130 million? Yesterdays trade volume for monero was 75 million (thus actual on chain tx's are much less). So it would take a while to do this without drawing attention. I don't have a lot of faith in pure bitcoin tumblers. Possibly scams or fraud. Im yet to see one that works as expected.

firethief 8y ago

That can be a difficulty but I imagine owning an exchange helps a lot