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On Wednesday, Ars reported that someone had transferred nearly $ 1 billion in bitcoin from a wallet likely associated with the Silk Road crime bazaar. Now we know who that mysterious party is: the United States Department of Justice, which shut down Silk Road in 2013 and sent its founder, Ross Ulbricht, behind bars for life.
“The success of the trial against the founder of Silk Road in 2015 left a billion dollar question open. Where did the money go? “US Attorney David Anderson said in a press release.” Today’s forfeiture complaint at least partially answers this open question. $ 1 billion of this criminal proceeds is now in the possession of the United States. “
Silk Road and Ulbricht were among the most popular and successful online crime figures in the history of the internet. Hosted on the anonymous Dark Web, the service brought together sellers and buyers of drugs, fake IDs, and virtually every other type of illicit good or service imaginable. There were thousands of retailers and “well over 100,000 buyers,” US lawyers wrote in a civil suit filed Thursday. The document states that Silk Road has generated revenue of over 9.5 million bitcoins and has collected commissions from these sales of over 600,000 bitcoins.
Thursday’s complaint came five years after Ulbricht was convicted and sentenced to two life sentences plus 40 years. The criminal investigative arm of the Internal Revenue Service helped track down the intricate scheme to obfuscate the recipients of the proceeds. The seizure occurred two days after blockchain analysts noticed that someone had transferred 69,369 BTC, worth about $ 975 million, from an account that had received it from Silk Road. The wallet, which has been silent since 2015, was the fourth largest in the world.
Enter Individual X
With intriguing details that look like something out of a detective novel, the complaint claims that a mysterious hacker identified only as Individual X was responsible for the transfer of the bitcoin seized from the Silk Road coffers.
“According to the investigation, Individual X was able to hack Silk Road and gain unauthorized and illegal access to Silk Road and then steal the illicit cryptocurrency from Silk Road and transfer it to Individual X-controlled wallets. , Ulbricht learned of the online identity of individual X and threatened individual X to return the cryptocurrency to Ulbricht. “
The unknown hacker did not return or spend the bitcoin. Instead, Individual X on Tuesday signed a consent and confiscation agreement with the U.S. Attorney’s Office in San Francisco, agreeing to turn over the funds to the government.
The complaint details the lengths Ulbricht employed to cloud the transfer of funds and the forensic experience that ultimately revealed the true origins of bitcoin.
Silk Road used a so-called “tumbler” to process Bitcoin transactions in a way designed to frustrate the tracking of individual transactions across the Blockchain. According to the Silk Road wiki webpage, “the Silk Road tumbler” sends all payments through a complex semi-random series of bogus transactions. . . making it nearly impossible to link your payment with coins leaving the site. “In other words, if a buyer makes a payment on Silk Road, the tumbler obscures any link between the buyer’s Bitcoin address and the seller’s Bitcoin address where the Bitcoins end up, making it unnecessary to use the Blockchain to follow. the trail of money involved in the transaction, even though the buyer’s and seller’s Bitcoin addresses are both known. The only function performed by the Silk Road implementation of such “puppets” is to assist in the laundering of criminal proceeds. “
Earlier this year, federal authorities used a third-party bitcoin attribution company to analyze the transactions performed by Silk Road. They focused on 54 transactions that transferred 70,411.46 BTC to two particular wallets: 1BADznNF3W1gi47R65MQs754KB7zTaGuYZ and 1BBqjKsYuLEUE9Y5WzdbzCtYzCiQgHqtPN. Bitcoin was valued at around $ 354,000 at the time. In April 2013, those two wallets sent 69,471,082201 BTC to a third wallet: 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbhx.
Two years later, this third wallet sent 101 bitcoins, worth $ 23,700 at the time, to BTC-e, an unlicensed cryptocurrency exchange whose founder was arrested in 2017 on suspicion of committing $ 4 billion. of bitcoin recycling. The remaining bitcoin remained in the wallet until this week’s seizure.
Blockchain analytics firm Chainalysis, which assisted in the investigation, provided further details along with the chart below showing the account flow.
“The proceeds of the crimes should not remain in the hands of the thieves,” Kelly R. Jackson, the special agent of the Internal Revenue Service Criminal Investigation in charge, said in a news release, according to the Chronicle. “Through CI [Criminal Investigation] experience in tracking money, we were able to track down illicit funds. “
