Bitcoin Fog Case Could Put Cryptocurrency Tracing on Trial

If the prosecution does not produce clear proof as Sterlingov’s case unfolds, it might need to count on the more indirect digital connections in between Sterlingov and Bitcoin Fog that it explains in the declaration of truths put together by the IRS’s criminal examinations department, much of which was based upon cryptocurrency tracing methods. That declaration reveals a path of monetary deals from 2011 apparently connecting Sterlingov to payments made to sign up the Bitcoinfog.com domain, which was not Bitcoin Fog’s real dark-web website however a conventional site that promoted it.

The funds to spend for that domain took a trip through numerous accounts and were ultimately exchanged from Bitcoin for the now-defunct digital currency Liberty Reserve, according to district attorneys. The IRS states IP addresses, blockchain information, and phone numbers connected with the different accounts all link the payments to Sterlingov. A Russian-language file in Sterlingov’s Google Account likewise explained an approach for obfuscating payments comparable to the one he’s implicated of utilizing for that domain registration.

Sterlingov states he “can’t keep in mind” if he produced Bitcoinfog.com and mentions that he operated at the time as a web designer for a Swedish marketing business, Capo Marknadskommunikation. “That was 11 years back,” Sterlingov states. “It’s actually tough for me to state anything particular.”

Even if the federal government can show that Sterlingov produced a site to promote Bitcoinfog.com in 2011, nevertheless– and Ekeland argues even that is based upon malfunctioning IP address connections that originated from Stertlingov’s usage of a VPN– Ekeland mentions that’s really various from running the Bitcoin Fog dark-web service for the subsequent years it stayed online and washed criminal earnings.

To reveal Sterlingov’s much deeper connection to Bitcoin Fog beyond a domain registration, the IRS states it utilized blockchain analysis to trace Bitcoin payments Sterlingov supposedly made as “test deals” to the service in 2011 prior to it was openly introduced. Private investigators likewise state that Sterlingov continued to get profits from Bitcoin Fog till 2019, likewise based upon their observations of cryptocurrency payments taped on the Bitcoin blockchain.

Ekeland counters that the defense hasn’t gotten any information of that blockchain analysis and explains that it was overlooked of the most current superseding indictment versus Sterlingov, which was submitted recently. That implies, he argues, that the federal government has actually based the core of its case on an unverified, fairly brand-new kind of forensics– one that he states led them to the incorrect suspect. “Has it been peer-reviewed? No,” Ekeland states of blockchain analysis. “Is it typically accepted in the clinical neighborhood? No. Does it have a recognized mistake rate? No. It’s unverifiable. They can state overall rubbish, and everybody needs to take it on faith.”

Ekeland states that discovery files in the event reveal that the prosecution’s cryptocurrency tracing was carried out with tools offered by Chainalysis, a New York– based blockchain analysis start-up, in addition to seeking advice from assistance from Excygent, a federal government specialist concentrating on cybercriminal and cryptocurrency examinations, which Chainalysis obtained in 2021.

Ekeland argues that Chainalysis, valued at $8.6 billion in a current financial investment round and often utilized in prominent cybercriminal police examinations, had a dispute of interest in the event, offered its monetary reliance on United States federal government agreements and a circulation of previous federal government detectives who have actually gone to work for Chainalysis. “This is a story of individuals profiteering and advancing their professions, tossing individuals in prison to promote their blockchain analysis tool that is scrap science and does not hold up against any examination,” states Ekeland. He includes that, based upon the proof supplied in Sterlingov’s case, he thinks “Chainalysis is the Theranos of blockchain analysis.”