Bitcoin Forum

This article really took my attention and I couldn't find it here
Seems that the US Department of Justice have stated their opining regarding the mixing of coins. Does this make all the bitcoin mixers illegal?
What is the future of such services from now on?
US DOJ Calls Bitcoin Mixing ‘a Crime’ in Arrest of Software Developer (https://www.coindesk.com/us-doj-calls-bitcoin-mixing-a-crime-in-arrest-of-software-developer)
a quote from the article:

The Helix case file:
https://www.justice.gov/opa/pr/ohio-resident-charged-operating-darknet-based-bitcoin-mixer-which-laundered-over-300-million

"This indictment underscores that seeking to obscure virtual currency transactions in this way is a crime"

That's what stands out to me. He was actively facilitating money laundering. That was his whole raison d'etre. He'd be just as nailed for doing the same thing in any other form.

It's a rather different proposition to some average person doing a Coinjoin type thing.

First was some people calling mixers a tool used by hackers, illegal gamblers, and money launderers.
Second is having articles like in the OP that using it is a crime.
Third will probably launching an investigation then arresting people behind these services.

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So if done the other way like coinjoin like you mentioned and using privacy coins like monero, it won't be a crime. That's how I understood it.

I would've thought so. But the gist I get from this, and I might be wrong, is that he created this service for no other reason than working with dark markets. He was also running some sort of drug search engine too.

That's rather different from another centralised service being used by all and sundry.

I expect all centralised mixing to become too hot eventually but this is a specific set of circumstances not repeated elsewhere.

Let's look at the legal definition of money laundering first,


Reference: https://en.m.wikipedia.org/wiki/Money_laundering

So in a way, mixing services are doing exactly the same. It is a service to conceal the origin of the fund. So as per definition, it is illegal in real world.

Not sure what would be it's crypto definition!

I don't see the issue with mixing legit funds, since you'll still be able to explain where the funds are from. Larry Harmon is suspected of having a partnership with AlphaBay, actively laundering their funds.

This is also the thing that made the whole thing somewhat understandable and cleared all the vagueness of the statement for me. Had the transaction been a legitimate one and mixed through the said process, there wouldn't be any indictment nor a case to begin with.


The bolded word already differs what the case did and what other mixing services did. Sure, there will be no way to know whether the funds that are being mixed on a mixing service is legitimate or not, but in this case, Harmon has been caught with some form of acquaintanceship with AlphaBay, and was somewhat noted to have some form of illegal activities on the side. Even if the mixing part of the funds weren't caught, the dude will be jailed nonetheless.

Iasenko, you should have put the whole paragraph

And again!

The crime was not mixing alone, the crime was advertising and facilitating the mixing of funds knowingly that the funds came from illegal sources.

It's not a crime to transport packages from Tijuana to Dallas.
But it's not the same when you advertise you transport anything from weed to heroin safely and anonymously!


It is illegal if the money is obtained illegally.
I can take my wage money, withdraw some from an ATM,  deposit on a different bank, load my PayPal account, buy a paysafecard with it, buy some game credits for a friend, receive 20 euros cash from him, deposit that on my bank account...
Anything illegal in it?

No it's not, go back to metanet.

Mixers conceal the origins, that's true, but I don't think that 'obtained illegally' is something that always applies to Bitcoin. In countries where Bitcoin is banned mixers can be considered as money laundering, I suppose, but if a person obtained Bitcoin without going against any regulations by, say, buying it with an official salary, I don't see how mixing it afterward would make it money laundering.
So I think it's early to say whether this situation means that all of Bitcoin mixers become illegal but the regulations might get tougher.

The noble cause of mixers are well documented in this forum and the idea of a country banning BTCitcoin and the citizens using mixers to protect themselves to avoid legal trouble is the noble cause but the problem is that if you are attaining a tainted coin through the mixer then you might get into trouble in the future, so there is a fine line and majority of the hacked coins are mixed through mixers and if you get those coins then you might get into trouble at a later time and that is the biggest issue i see with mixers.

moving funds is not a crime
moving funds with innocent lack of knowedge of the source of funds or the details of who is not a crime

knowing your handling and profiting from illicitly gained funds is
advertising a service to facilitate it is..

designing a service that has the capability to launder but not doing it is not
(EG fiat can be used for money laundering but banks dont get punished for it. unless they have had knowledge and direct involvement in letting it occur)
(EG scammers use apple and google giftcards for scamming/laundering. but google does not get told to shut down its wallets)

although i detest the guy for many reasons. people like gmax wont get arrested for his 'confidential' code stuff he wrote for the many networks he is part of

however if he was to handle funds and pass them on knowing he is doing so as a service for illicit activity he would get in trouble..

so this article is not about mixing.. its about offering a mixing on the darknet specifically highlighting its service to the dark net nafarius/illicit part of the internet

Same here, although nothing is a crime unless there's a law on the books and I don't think there is one regarding mixers....yet. 

Makes me wonder where the pressure is coming from to crack down on crypto like this.  The DOJ is but one branch of the US government, albeit a big one.  I'm wondering whether any such pressure is being exerted by the prez. 

They've probably got all the Chipmixer sig campaign participants on the FBI's watch list.  Never underestimate the power or stupidity of government agencies.

In the eyes of bankers, BTC mixing sounds too many alarms.
It's using an unlicensed (in their view) form of digital cash, with pseudonymous and decentralized transactions, and even then the coins are tumbled in a way that the original recipient is lost on the way. For the coins to be sent to an unregistered and likely pseudonyms address again, for unknown transactions.

The intentions might be pure, or maybe not. But I get why this entire ordeal would drive systemic regulators and bankers crazy. Bitcoin mixers are taking away businesses from bankers that used to turn a blind eye to money laundering, arguably a sizeable share of their cash transactions.

There are many illegal aspects to finance, job markets and economies that are not currently enforced.

Paying workers in cash, off the books, is technically illegal. And yet exceedingly common due to laws against the practice not being enforced. Not necessarily on a lack of will but rather due to them lacking the resources and manpower to crackdown on it. Not to mention the negative backlash, loss of jobs and confidence in the system should they make a legitimate effort.

The DoJ can label mixers or anything else illegal, without it representing an actual intent to enforce those laws.

Technically streaming and warez websites are illegal. The Department of Justice will tell you so. Tell me how much success the DoJ has had ending warez, streaming, spam emails and other explicitly illegal practices.

The sad thing is, their crackdowns don't improve quality of life or standard of living. Instead, they tend to be oppressive and destroy opportunities for everyone.

Their policies often wind up representing the opposite of "justice".

I wonder what information putting a backdoor in server-side mixing software would give them. Mixers only take your wallet address and the amount of bitcoin you want to mix. So theoretically that's the only information they would be able to siphon. At worst they only know the source address that tried to launder the funds, all while acknowledging that bitcoin mixing was intended to be used only as a privacy aid.

If you're making a mixer specifically to clean illegal money (not saying the guy in that article actually did this, I have no idea), don't be surprised if your premises are raided and your servers are seized. Which brings me to the question, why attempt to backdoor mixers anyway when they can just seize their computer hardware?

@The Pharmacist, your last sentence was interesting to read, but I don't think a central forum like bitcointalk would be the first place the FBI would look for people laundering money obtained from illegal things. These kind of people group around tor .onion sites.

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The worst part about all this is that the arrested dev's wife is getting threats from random jerks. And their place of residence was also disclosed in the publicly available indictment which means stalkers might come and harass his family who did nothing wrong. And their homes were trashed by police according to his brother. Which makes it all the more dangerous to be a mixer developer today.


 ^ Finish investigations before making conclusions for they could be highly inaccurate.

They took all the dev's hardware wallets, the article even says there's no bitcoin left with the family.

I'm not that fluent in English as you can see, that's why I was posted this here, I not sure if DoJ are considering illegal all type of coin mixers in general, or this is only for this particular case, where it is clear that those mixed coins were involved in money laundering?
How you guys getting this?

To me it's clear this declaration is about this one particular case.

I'm sure centralised mixers will eventually have more pressure put on them, but this guy created his system only for the purpose of hiding illegal earnings and nothing else. It would be the same if he had founded a bank to do that one job.

It might mean in future they will regard any mixer that handles problematic funds to be enabling crime and so they'll be fully liable. They probably do already. This guy made it easy to stop.

It's a complex subject to discuss, and I think US prefers to ban mixers to prevent crimes

But we have to consider mixers the same thing as any kind of technology: it's just technology, people can use for crimes, so is it right to blame the tech or the person to commit the crime?

People use computers, smartphones, money, cars etc to commit crimes, why not bans all of these?

Agree with gentlemand here somewhat (on the intent, rather than the activity). Even in the recent arrests (is last year even recent now?) and shut down of past mixers at least in the ones where Dutch police were involved, the mixers apparently specifically and deliberately aided in money laundering.

Now I'm not saying any facts other than as reported and we know there's little truth in that at times. Under AML laws for example, ignorance is not innocence. So let's see what comes out of this.

this case relies on very specific facts to justify the money laundering charge. mixing outputs is not itself a crime. knowingly mixing coins from a DNM is also not a crime since it doesn't prove the mixer knew the underlying financial transaction involved criminal proceeds.


the partnership with alphabay and other DNMs showcases the explicit agreement required for the conspiracy charge. explicit advertisement as a money laundering service fulfills the "willful intent to commit a crime" requirement.

that's how the DOJ made this case.

I think this was connected to the case of money laundering via mixers. It's not mixing that is illegal but mixing illegal funds is. I know it may look weird but the law is weird in this way.

Hiding someone in your house is legal. Hiding a criminal can be illegal depending on the crime and your knowledge of it. Hiding a fugitive whose face is in the news is illegal and they won't even ask if you knew or not. They'll assume that you knew.
This mixing case is similar.

For all the people still wondering what is Bitcoin mixing.

Bitcoin tumbling, also referred to as Bitcoin mixing or Bitcoin laundering, is the process of using a third party service to break the connection between a Bitcoin address sending coins and the address(s) they are sent to. ( Taken from Google)

Now there are certain things that can go wrong with that :-

*People dealing with something illegal can hide their address because now a days most of the addresses are linked with the real identity , PAN card and all , so I'm case of a fraud the government won't be able to track the person .

*Government may be even trying to track the non tax payers who are hiding from the eyes of the law and trying to hide the money they are making using bitcoins.

*Or the government of US actually made bitcoins in this other world senario and they are now just trying to avoid such problems [[ Government might be smart but people are smarter at the end of the day (they always find a way) ]]

With the recent crackdown on centralized Bitcoin mixing services, I believe that non-custodial solutions will rise like never before. We already have non-custodial mixers such as Wasabi Wallet, JoinMarket, and NTumbleBit (under development). This could render government efforts on taking down mixing services useless over time. The fact that most people still rely on centralized Bitcoin mixers, gives governments the opportunity to "punish" the central operator. Their main excuse is that mixers are used for money laundering and tax evasion. But the truth is that criminals still use Fiat over Bitcoin for this. After all, Bitcoin's price is volatile while that's not the case with Fiat.

This recent event of the US DOJ tells us that more decentralized solutions are necessary in order to provide censorship-resistance to the crypto space. It was easy for the US government to take down the mixing service in question because it was centralized. After all, fees were collected by the central operator. This is just the beginning of the end as I believe that the US and other countries of the world will crackdown on other Bitcoin mixing services in the crypto space. The only path for true censorship-resistance would be to use decentralized/non-custodial mixers for obfuscating Bitcoin transactions.

Nonetheless, I believe that all centralized Bitcoin mixers will fall within the crypto space. Only decentralized/non-custodial mixers will be able to resist government's intervention in the long run. There's no central operator in charge of the mixer, so everything is handled in an automated and decentralized way. Once governments realize it's near impossible to shut down a non-custodial mixer, they might consider banning crypto in its entirety (I hope not). Maybe governments will prosecute developers working on decentralized solutions for the BTC blockchain? If that happens, then Bitcoin and other cryptocurrencies will be "doomed" as they'll be unable to keep up with their value proposition of eliminating third parties from the system. Just my thoughts ;D

Bittorrent has caused untold billions of losses to content producers, in their and the government's mind at least, yet the the founder and developers are doing just fine out in public.

I can't see any software developer ever being held liable for what's done with what they create by others.

Let me reiterate the definition again with two bolded statement-
Money laundering is the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions.

In the above scenario given by you - the money is not obtained illegally! So one of two parameters is invalid here! Hence it is not illegal! Money laundering process is far more complex in nature. People create shell companies, fake subsidiaries, fake invoices to hide the origin of the illegally obtained money. They invest in real estate in the name of the shell companies and then sell it to their own subsidiary company. There are a lot of things they do. Wage money is not illegal and money launderers don't really launder a small amount of money!

You should come to Indian political parties (especially the ruling one) to learn the art of money laundering! They have achieved supremacy in all sorts of illegal wrongdoings! :)

seriously tho, what legit reason do you need a mixer for if its not to "illegally" hide the origin of the bitcoin you are mixing?

whether it was obtained legally or not, the act of hiding it is illegal.

Here are my 2 cents about this topic.
Bitcoin mixer services are just a tool.It can be used for illegal purposes or good purposes.The tool itself can't be illegal,but the person who uses it for illegal purposes breaks the law and have to be punished somehow.
If the USA bans bitcoin mixers,the effectiveness of such ban is questionable.The BTC mixer services and their users will just move to other jurisdictions and continue working.I was expecting mixers to be attacked by the authorities,sooner or later.Almost everyone who is using the darknet marketplaces uses mixers as well.

I thought this topic was about Wasabi Wallet, Samourai Wallet, and the JoinMarket, and that nopara73, and the other developers got arrested! Hahaha.

Mixing 1s,and 0s is not a crime. I believe, FIRST, the DOJ should declare, and fight in court, that Bitcoin is a form of "money". 8)

Doing bad stuff / code shit for bad purpose

is

a


crime

the guy had no mercy:


and that also made me think about the following: how was it possible to take all hardware wallets? because are supposed to hide somewhere very safe


it reminds me of this:


he already knew that the authorities were hunting the mixers. it seems to me that it will not end well for mixer owners. Unfortunately governments will not accept mixers due to their nature


when it comes to laws, things get complicated, why do you think there is kyc? and how would mixers obtain a license and comply with KYC? I like a mixer, I like it a lot, I've used it a few times and to be honest whenever necessary, I'll use the mixers, but I don't see how the mixers won't be illegal

Imagine if the conventional banking world introduced a system that ran along the same lines as Bitcoin. Every time you bought a barbed wire dildo the place you bought it from would be able to see how much money you had, where else you spent it and what you spend in future.

It would take about ten minutes for the nearest banker to be dangling from a lamp post.

Wanting to keep your business to yourself is a perfectly sensible and necessary desire.

What about Wasabi Wallet, JoinMarket, or some other, not yet invented, peer to peer/decentralized mixing? How would that be "illegal"? Why/how can the obfuscation of OUR UTXOs be illegal?

I feel like we still live in an approximately okay present, but the future looks horrific. Any attempt of having more privacy will most likely be seen as a crime..

You know, it's funny how I am literally able to hand a complete stranger a paper with the private key to some illicit-sourced Bitcoins and get them in big trouble because of it.

We live in a God damn shit world. Transparency apparently comes with its big cost too. It was somehow forseeable they'll count this as a crime though, all fun BTC-related stuff doesn't last very long anyway. :)

Yes, the most forms of privacy in regards to the financial matters will be outlawed. This is why cash is slowly being removed in many countries (see Sweden), in business transactions in Europe you have limits for paying in cash (above some threshold you can legally pay only by a bank transfer).
As well FATF with its recommendations which are basically obligatory aims for outlawing privacy solutions like private coins, mixers and make each owner of wallet fully identifiable (just as bank account owners).

Good that you cleared it out because if bitcoin mixers were to be considered as illegal then I guess they should have termed TOR as illegal too.

The mere act of mixing your outputs (decentralized or not) isn't money laundering because there is no proof of unlawful intent. This is true of cash, bitcoins or anything else. The issue isn't that output mixing is illegal. On its own, it is not.

Regarding money transmission law, US regulators have drawn a clear distinction (https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf) between decentralized mixing protocols like CoinJoin and centralized mixing services. That issue is about who is a money transmitter and therefore is supposed to comply with MSB regulations, and who is not:

vs.

That's certainly true, mate. But we cannot discard the possibility of governments prosecuting cryptocurrency developers in the future, once they believe crypto and Blockchain tech to be a threat against the current monetary system. Expect to see a massive crackdown into Bitcoin if people begin using decentralized solutions on top of centralized ones.

Considering that people are still acquainted with centralized exchanges and mixing services, I doubt governments will become interested in making software developers liable anytime soon. We'll have to see how everything unfolds in the future as governments continue to shut down centralized mixers. After all, their excuse is that mixers are used for money laundering and tax evasion. Even if a mixing service hasn't done anything wrong, the central operator could be held liable for any illegal activities done on it. The only way the mixer operator can be relieved is if he enforces KYC/AML laws on people using its service. But this will greatly defeat the purpose of a mixer which is to provide privacy over one's crypto transactions.

Nonetheless, with the advent of non-custodial mixers, anyone can confidently obfuscate their Bitcoin transactions without governments being able to disrupt the service. Centralized Bitcoin mixers will eventually die because of the massive crackdown from worldwide governments. This recent event from the US DOJ shutting down a centralized mixer is just the beginning. First it was bestmixer, and now this one. The trend will continue until all centralized exchanges are shut down for good. Luckily, people will still be able to mix their Bitcoin using non-custodial solutions or even exchanging BTC to a privacy-oriented coin (like Monero) of their choice. At least, there's nothing to worry about. Just my thoughts ;D

Read bolded. JoinMarket "market-makers" are actually "liquidity-providers", that ask for a fee in exchange for providing liquidity. Is that considered a money-transmitter?

I don't think so. To qualify as a money transmitter in the second scenario, one would need to both develop the mixing platform and also profit from the associated money transmission.

It's arguable that a market-maker does neither. They are profiting from the bid-offer spread, not the mixing activity:


You would see the same distinction with an exchange. A market-maker on an exchange doesn't pocket trading commissions whenever trades are made -- the exchange operators do. That's who FinCEN is targeting, the ones who build the platform and are profiting from it.

I think monitoring a bitcoin mixer or software is good to monitor because today there is a lot of projects released by the people and they want to create those to spread into the world of crypto and gained a lot of users. Today there is a lot of software created just use to scam other people and also it is good we the US restricting the use of software also we want to avoid having future problems like not secured data and information. Still, we need to have a lot of verifications before we tell that bitcoin mixing is a crime because we all know it is decentralized we can restrict but we cannot control the market value of these coins and the use and purpose of it.

Then in a decentralized "market-place" for mixing such as JoinMarket? Who's the target? That's a purely 1's and 0's tumbling scenario.

Nobody, not for unlicensed money transmission anyway. JoinMarket just links together liquidity providers with liquidity takers, who pay fees to each other. The developers of JoinMarket are not generating business income from release of the code, so they aren't considered money transmitters under this law.

That's certainly true, mate. FinCEN targets central operators who profit from market trades, money transmitting services, etc. But I find it odd to see the SEC targeting the Etherdelta developer after being a decentralized exchange with no central operator. If they've still enforced securities laws on a decentralized exchange, they could easily make decentralized mixers' developers accountable too. After all, the government would not want people to use crypto in order to obtain financial freedom. Once they see Bitcoin and other cryptocurrencies as a threat to the existence of the current monetary system, you could expect something like this to happen in the future.

We cannot discard the possibility of governments making developers accountable for decentralized exchanges, mixers, and other crypto solutions. The US government has been the most strict one when it comes to crypto/Blockchain regulation. They've taken down the mixer in question and could easily shut down others over time. Once people start using non-custodial Bitcoin mixers like Wasabi Wallet and JoinMarket, you could expect opposition from the US and other worldwide countries. The main excuse from these entities will be that decentralized mixing solutions open a pathway for criminals to launder money and evade taxes at will. While we know that Fiat is used more for this than crypto, governments don't see it that way.

In the end, this will be a never-ending battle between crypto/Blockchain proponents and governments with central banks. Governments will continue to pressure the industry until everything is completely centralized (dependent on centralized exchanges, and other services). After all, it's no secret that today's crypto land is largely dominated by centralized exchanges. It would be surprising to see centralized mixers enforcing KYC/AML sometime in the future due to government's pressure within the mainstream world. If that happens, I believe that people will be more inclined to using non-custodial mixers than anything else. The recent situation of arresting a mixer operator, is only the beginning. Just my thoughts ;D

etherdelta = non-custodial, not decentralized. they had centralized servers, order book matching, DNS registration, etc

the SEC noted this distinction in their case against etherdelta: (https://coincenter.org/entry/what-can-the-etherdelta-settlement-tell-us-about-how-decentralized-exchanges-are-regulated)


p2p trades (or mixes) done completely at the protocol level (without reliance on centralized third parties) don't fit that situation. the biggest issue for p2p trading is decentralized order matching, which is still a big challenge.

Interesting fact. For once, I've thought that the Etherdelta exchange was completely decentralized. But now I know more about the situation. This explains why the SEC required the Etherdelta developer to comply with securities. I guess that if software developers decide to make everything decentralized at the protocol level, mainstream governments wouldn't have a reason to prosecute them. As far as I know, there's only one true decentralized exchange called Block DX. It may survive a lifetime as governments will be unable to interrupt its services.

As far as mixers go, we need more decentralized solutions for Bitcoin in order to completely eliminate the need for centralized mixing services. While we still have the Wasabi Wallet, and JoinMarket, the much-awaited decentralized mixer called "TumbleBit" is still in active development and not ready for mainstream use. People will either need to rely on privacy coins completely (Monero, Grin) or trade Bitcoin in a P2P manner to prevent suspicion from the government (or they could use Wasabi Wallet while they're at it). Once TumbleBit is ready for mainstream use, you could expect people to use Bitcoin more thoroughly for privacy-centric transactions (as I believe it's the best solution around for privacy).

The current actions of the US government is just the beginning, as other countries will follow in eliminating centralized mixers from existence. Thankfully, we have decentralized solutions for preserving our privacy no matter what the government's efforts will be. The recent news should have no effect whatsoever in Bitcoin's growth within the mainstream world. Sooner or later, governments worldwide will realize that their efforts in diminishing Bitcoin's growth/usage will be in vain, leaving them with no choice but to join the "monetary evolution". India has already lifted its ban related to Bitcoin and other cryptocurrencies' usage within the country. Which means that countries will become more friendly to crypto and Blockchain tech as time goes by. Just my thoughts ;D

The title of the article is really poor, does give an impression that every mixer will get a special uber ride to jail. But the reality is that the guy made a service specifically to move around black markets, it gave me the impression that if you're not actively promoting illegal activities you should be in the clear if you want to use mixing platforms. However, I do see govts kinda don't want people to be completely off the grid anyway, and this could be used as a premise for future trials to eventually crack down on all efforst to fully anonimyze your funds, and that's what I think should be worrisome. But only time will tell.

I unquestionably anticipate that the US should take action against blenders, I'm amazed they haven't been putting indirect accesses or making their own to follow programmers once they blend assets after a serious wrongdoing. I anticipate that the US should keep this up and it being one among their enormous endeavors they were talking about prior this month.