More Bitcoin Busts


On Thursday (Nov. 6), U.S. federal officials trumpeted that they had shut down a Web site that used Bitcoin transactions to try and hide $8 million a month in illegal drug and illegal services trafficking.

The site was called Silk Road 2.0 and it leveraged two means to help keep its illegal community—the site had about 150,000 active users—safe from law enforcement detection. First was that it was riding the “Tor” network, which the feds described as a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses of the computers on the network and thereby the identities of the network’s users.

But the second method was leveraging Bitcoin transactions to further try and maintain the purchaser’s anonymity. The site used a tumbler—aka a mixer—to process the Bitcoin transactions. The federal indictment said that tumblers “are designed to frustrate the tracking of individual Bitcoin transactions by passing the Bitcoins through numerous dummy transactions on the Blockchain, the public ledger where all Bitcoin transactions are recorded. The tumbler thereby obscures any link between the Bitcoin addresses involved in Silk Road 2.0 transactions, making it fruitless to use the Blockchain to follow the money trail involved in the transaction, even if the buyer’s and vendor’s Bitcoin addresses are both known.”

What were some of the services offered? For 0.21 Bitcoins (about $98), you could buy a fake New Jersey’s driver’s license, complete with legitimate holograms. For 1.32 Bitcoins (about $624), you could get any web site hacked. E-mail hacking only cost 0.09 Bitcoins (about $42).

The authorities who made the announcement were from the United States Attorney for the Southern District of New York, the Federal Bureau of Investigation and the U.S. Department of Homeland Security.


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