US DOJ Calls Bitcoin Mixing ‘a Crime’ in Arrest of Software Developer

[TheBeardedBaby]

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
a quote from the article:

In a statement Thursday, Justice Department Assistant Attorney General Brian Benczkowski made the department’s views on bitcoin mixers clear. “This indictment underscores that seeking to obscure virtual currency transactions in this way is a crime,” he said.

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

[gentlemand]

"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.

[rosezionjohn]

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.

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

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.

[gentlemand]

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.

[avikz]

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

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.

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!

[TheNewAnon135246]

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
a quote from the article:

In a statement Thursday, Justice Department Assistant Attorney General Brian Benczkowski made the department’s views on bitcoin mixers clear. “This indictment underscores that seeking to obscure virtual currency transactions in this way is a crime,” he said.

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

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.

[dothebeats]

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

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.

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

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.

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!

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.

[stompix]

"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.

Iasenko, you should have put the whole paragraph

According to the indictment, Harmon operated Helix from 2014 to 2017.  Helix functioned as a bitcoin “mixer” or “tumbler,” allowing customers, for a fee, to send bitcoin to designated recipients in a manner that was designed to conceal the source or owner of the bitcoin.  Helix was linked to and associated  with “Grams,” a Darknet search engine also run by Harmon.  Harmon advertised Helix to customers on the Darknet as a way to conceal transactions from law enforcement.

And again!

“For those who seek to use Darknet-based cryptocurrency tumblers, these charges should serve as a reminder that law enforcement, through its partnerships and collaboration, will uncover illegal activity and charge those responsible for unlawful acts,” said U.S. Attorney Timothy J. Shea of the District of Columbia.

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!

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

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.

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!

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?

[TheNewAnon135246]

Basically, the LN at its core is a system for moving funds through peers with no requirement to check where it is coming from or going to.
That itself is money laundering,

No it's not, go back to metanet.

[kryptqnick]

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

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.

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!

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.

[eaLiTy]

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.

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.

[franky1]

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

[The Sceptical Chymist]

I definitely expect the US to crack down on mixers, I'm surprised they haven't been putting backdoors or creating their own to trace hackers when they mix funds after a big crime. I expect the US to keep this up and it being one of their large efforts they were discussing earlier this month.

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.

[alani123]

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

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.

[Hydrogen]

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".

[NotATether]

I definitely expect the US to crack down on mixers, I'm surprised they haven't been putting backdoors or creating their own to trace hackers when they mix funds after a big crime. I expect the US to keep this up and it being one of their large efforts they were discussing earlier this month.

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.

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.


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.

“Now our family is getting threatened because the FBI decided to tell the world that there might be money hidden with us somehow,” Gary said. “They have no proof of this and are now putting our family in danger.”

 ^ 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.

[TheBeardedBaby]

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?

[gentlemand]

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.

[rdluffy]

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?

[buwaytress]

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.