Irrefutable evidence that mixers alone are unsuitable for money laundering!

[NotATether]

A few days ago I watched this video https://www.youtube.com/watch?v=R5FSXCYrlt0

It is about a former DEA agent who cracked down on money laundering rings. Pretty much all of them being in cash.

So he explains that criminals in one country have a ton of money they need to get out of the borders, and how the criminals will bring large sums like 500K, 1 million, and stuff like that to a contact person, who then gives them a location to get different kinds of blank checks and IOUs which they can write for themselves (making them look like a normal payment) that can be redeemed for money. Nowadays they are probably using Amazon, Google Play and iTunes gift cards.

Then these notes are deposited with some bank under an LLC. Then they loan that money to another LLC in another country via the bank and use the notes as collateral. That other LLC loans it out again to yet another LLC in another country, and this happens a few more times till it eventually ends up in the destination country, where the heads and brains of the ops are.

It has come to my attention that people are claiming that crypto mixers are used exclusively for money laundering. Well let's examine how money laundering in crypto would look like.


So, let's say you hacked an exchange or you scammed some really big people, and now you want to save the money before the police zone in on you. You can already send crypto across borders and without a ton of shell companies^, so a professional money launderer would probably do something like this:

- They would get rid of undesirable coins like USDT: Go to several exchangers and DEXes (decentralized exchanges), giving each of them fractions of the undesirable cryptocurrency, to sell for another kind of crypto.

So anything that could be blocked, or has low liquidity and vulnerable to a flash crash, or is too traceable, is sold for XMR/BTC/ETH/LTC or something else.

- The money is split into different addresses because carrying the entire amount in one address puts a huge target on your head for anyone on the internet to see.

- Maybe you use a mixer to obfuscate the origin of the coins. Most people who do that won't send them to an exchange for cashing out after that because exchanges usually seize mixed coins or reject them.

- For other addresses, perhaps you cash them out (as dollars or gift cards) in person or in small amounts on non-KYC accounts or maybe using KYC accounts verified via identity theft and buy a mansion/Lamborghini/private jet before you get busted by feds.

^Keep in mind though that the less legal entities involved, the easier it is for the governments to bust a money laundering scheme. This is true whether you use cash or crypto.

All of this together is obviously money laundering, however using only a mixer to anonymize the coins is not usually desirable because the whole point of money laundering is to make the money look clean. It is easy to identify addresses belonging to a mixer even if you cannot untangle the source of the transactions, so this will automatically "taint" the coins in the eyes of custodial services when you go to cash out.

Basically the only workflow in which you only use a mixer is if you sweep somebody else's wallet after you hack it, and have no desire to exchange the coins for something else. Apparently, this is what NK's hacker group has been doing for a long time.

But even then, eventually, they will want to spend it, and will illegally trade the stolen crypto for gift cards en masse somehow.

So, how do they cash out, how do they buy missiles and other weapons that they want? Obviously they cannot cash out in USD, because not only will exchanges reject cash outs worth hundreds of thousands of dollars even with the coins being mixed, their weapons suppliers are from countries that do not deal with USD.

So what they use is a special kind of exchange, one that is created specifically for money laundering and allows customers to cash out using the currency that is desirable. KYC checks on these exchanges are basically lax or non-existent. It is important to remember that these seemingly "legitimate businesses" are actually shell companies set up specifically for money laundering, in violation of international law, and must be included in any discussion of how people are washing crypto.

These exchanges are usually in east europe, russia, or somewhere else with lax laws. There's been a few instances of interpol and other orgs taking down these exchanges and arresting their founders, on the news.


Here's the Oxford dictionary's definition of money laundering:

the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.

So if you have obtained the money by scamming people, hacking wallets or services, malware, blackmail, or other types of theft, then that is money laundering.

To conceal the origins of illegally obtained money can be done using a mixer, however a mixer is also a legitimate business in the sense that (most*) were created to solve a very important problem: How to preserve the privacy of your bitcoins on a public blockchain?

*A few mixers were explicitly created with the intention to facilitate money laundering for darknet sites, such as Helix. But most, including the one on my signature AFAIK, are not created with this intention and purpose.

Last, I want to mention that the former agent in the video has also pointed out that cryptocurrency is not appealing to criminals for money laundering because the price always fluctuates and is volatile. Except for stablecoins I guess - but not the centralized ones like Tether that can be seized. But the other reason not mentioned why it is unappealing to criminals is because the blockchain is public** and everyone, including prosecutors, can explore it. So if a mixer is taken down for whatever reason and is de-obfuscated, the criminals will also be burned.

**Except for Monero, ZCash shielded addresses, Litecoin MimbleWimble addresses and derivatives. But I've never seen an XMR mixer or ZCash mixer or LTC mixer, because the obfuscation is already done inside the protocol? Does that mean was should copy governments' stance when they say: "privacy coins like Monero are mainly used for money laundering"? Because the mixer for BTC is technically equivalent to the blockchain of one of these coins.

That is why cash is still prevalent in the underground for money laundering, and crypto will continue to be unattractive for money laundering use in the near future.***

It is also why you cannot use a mixer by itself to launder money: Most people you want to buy from don't accept crypto so it must be converted to some other money with another service. Weapons manufacturers and most real estate agents and car dealerships won't be accepting crypto for a long time, either. Especially not using any sort of gift cards.

***If you live in the USA though, pretty much every activity involving crypto is a minefield you have to navigate anyway, so there are additional hazards in using crypto exchanges and other services like mixers, but these are mainly tax and IRS-related issues, not federal and FBI-related issues.

edited for spelling

Disclaimer: This post is for educational purposes only and is not intended to help anyone facilitate any illegal activities. This content is probably useless if you are a criminal trying to launder money anyway, so I'm not responsible for any result that happens from the content of this post.

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[Poker Player]

As you rightly say, the big money laundering, of significant amounts, is done via international transfers and corporate networks. This has been known for a long time. Added to that is the problem that when a judge begins to investigate and finds evidence, he has to send international requests to the countries through which the money has passed to provide information. That if they do it, although nowadays almost all of them usually collaborate, but even when they do it the process takes a long time, and justice is not fast by itself.

As far as cryptocurrencies are concerned, I understand that if you want to launder large amounts you will have to do much more than pass (part of them) through a mixer.

[ImThour]

Most of the business which are in money laundering are no longer using these Mixers. They have much better options to use rather using Bitcoin. They can simply buy XMR (Monero) and use that as it's a private blockchain. No transaction can be tracked. And then you can even use Monero to then get it converted into real fiat money. And yes, that's true. Mixers alone are no longer suitable for money laundering.

[348Judah]

When we are talking about money laundering, this is an aspect that covers alot of entities including tye government themselves, they are not exempted to be detestable, bitcoin mixing is only introduced to help increasing privacy of its users and not to appear as a shade to harbour money laundering, governments themselves are not excluded in the act of money laundering, they have to understand that bitcoin mixing is only targeted on users who are more privacy consciouss than ordinary attempts on scam or money laundering they taught it helped and increases.

Just as everyone having their money can decided on the means to safe them or the bank to use, we can also make use of a bitcoin mixer for our privacy as we so wishes and this is not a call forbthe governments threat on the operational activities on this mixing organizations, if they think mixing isn't good enough for use by the people, then it's as well as saying bitcoin indirectly isn't recommendable as well, whereas bitcoiners can go on running a fullnode transaction themselves to achieve highest privacy using bisq or bitcoincore software over Tor for achieving their desires, but obviously we may not see everyone having bthe knowledge of how to run these a perfect way because of the technical aspects it requires, while mixing could be an easy and affordable means of getting privacy for them.

[pooya87]

One thing that people who argue against mixers with the logic involving "money laundering" always forget is that it is not enough to obfuscate the coin's origin, when laundering money one has to be able to explain how they got the excess money not particularly from where.

For example someone who is barely living hand to mouth on a £2k salary in UK can not suddenly come to a million dollar worth of bitcoin out of nowhere! It doesn't matter even if they swap their "dirty" coins with "virgin" coins (fresh block reward) as long as they are not capable of explaining where they got that million bucks from.

In real money laundering, the criminal would come up with a contract with an actual business (like a laundromat!) to launder their money through their business by "cooking the books". For example the business that in reality has barely £500 income would report its income as £3k, £2.5k of which being the dirty money hence "cleaning" it every month.

This means even if a criminal wanted to launder their cryptocurrency, they'd use exchanges not mixers (ignoring the KYC issues in exchanges) so that they can fake it as their "profit" whereas mixers are useless for laundering.

[Crypt0Gore]

I knew this since the days when mixers are still new, I know that the law will always have their ways on getting users arrested when they launder money using these services, I would rather use an anonymous crypto currency that has top-notch privacy activated like Monero, Tectum's SoftNote, and Aleph Zero ( privacy feature still in work), I think these options are better than mixing services.

I also believe that privacy coins will have the biggest problem with SEC and other in future, because of the capability they have and how helping it will be for those that knows nothing than laundering money.

[SeriouslyGiveaway]

One thing that people who argue against mixers with the logic involving "money laundering" always forget is that it is not enough to obfuscate the coin's origin, when laundering money one has to be able to explain how they got the excess money not particularly from where.

Money laundering is a complex process from money origin to money outputs and leftovers.

It is like a complicated chain and any element of the chain is bad will cause the whole chain is bad in privacy. Mixers strongly warn their users importance of inputs and outputs of coins and if a person has bad inputs or outputs, privacy will be less solid.

Money laundering with coins will be related to other chains like from Bitcoin to Monero to stable coins on Ethereum or Binance Smart Chain. Other chains can have bad technical designs for privacy and they will be like a bad element for privacy.

It can relate to cashing out to cash too and it will be another weak element for privacy.

Mixing, mixers are not enough for privacy protection.

[stompix]

Apparently, this is what NK's hacker group has been doing for a long time.
But even then, eventually, they will want to spend it, and will illegally trade the stolen crypto for gift cards en masse somehow.

So, how do they cash out, how do they buy missiles and other weapons that they want? Obviously they cannot cash out in USD, because not only will exchanges reject cash outs worth hundreds of thousands of dollars even with the coins being mixed, their weapons suppliers are from countries that do not deal with USD.

Everyone deals with USD, remember that before the hacking North Korea was making money with forged US dollars! I'm willing to bet that you won't find a single Taliban that will say no to a 100 dollar bill

For both hacked bank accountants stolen cryptos the whole thing is pretty easy, all it takes is good timing and ood beforehand preparation
- For banks, you initiate transfers to local  business, nonprofit organizations, most of them if not cover-ups are themselves not in control of their bank accounts, and for other bank transfers, you simply split the money, and from there, you start either a bank run with tens of guys cashing in already prepared ATM cards or you deposit the money to your own shell business, remember that Lazarus is actually a government agency, all they need to do is bring some of the  money to China or to a Chinese setup bank account, and China will do nothing
- For crypto, it's even easier, all you need is mules around the world who will take care of that money for a fee, p2p exchanges, fake companies that own a few ATMs, and so on.

Nobody is rushing them and they don't care that much about the losses, they were happy in cases to get even one-tenth of the original sums, and they are known to break a million-dollar account into payments worth a few thousand. Also don't forget that not all the money needs to go to NK, most of it is spent locally to pay for stuff that gets sent to China and from there to NK, and they have to fund their agents also!

There is a huge difference between Lazarus which is believed to have members in the hundreds spread across the globe and two morons like Razzlekhan and her partner who with millions in their pocket bought a $500 Walmart gift card with their email on it. 

[Faisal2202]

You have made a great post here; I really like it, and I also got many ideas (topics to learn more about). One thing I learned after getting familiar with Mixers is that money launderers really do not prefer crypto, as when I started to do some research on my knowledge level, I came to know that the addresses will be tagged asred, which are involved in money laundering or stealing purposes. And that, North Korea has two main groups of hackers: one in the country and one (I do not really know if there are more than 1) outside the country to steal money. In 2022, they stole billions of dollars, but most of that money cannot be used by them because the tracking is so high that if they try to send that money to somewhere else, they are easily tracked.

I also read that many red-tagged wallets have been inactive for many years and are waiting for the right opportunity or, I think, the right tool that could help them.

TBH, IMHO, there are some platforms that are under pressure from authorities due to their involvement in ML and because they might be the products of NKs or indirectly related to them.

Even though I think FTX's downtrend has a huge link to NK's stolen money, I do not have anything to connect here directly but indirectly. That's why I think we should avoid the discussion.

[franky1]

i do find it extremely funny that the certain group of people that want to use mixers have not even thought outside of the box(or block) of ways to hide coin origins or taint.. there is the most biggest built in feature of a blockchain they completely miss which they can use to successfully sever taint.. and outside of the blockchain they do not even think abut the legal loopholes to not have the services treated as mixing/laundering services

when mixers have by regulation been deemed laundering.. the first step is stop calling a service by that name.. invent something new..
EG how did uber escape not needing to have taxicab emblems/licences/permits... simply they didnt call themselves a taxi

as for how to remove taint.. lets see how many more years people take to learn how to remove a coins taint. its so obvious im surprised no one has yet

[ZAINmalik75]

I do not know why, but it is a relief to hear that mixers are not suitable for money laundering. I had this feeling in my heart that this could be stopped, as many mixers were accused and seized just because of money laundering. In a recent event, a mixer got seized, and in that process, a lot of assets were also seized that belonged to unknown people.

I hope one day these mixers will not be used or preferred by those black money holders who wanted to white their money. I hope these mixers will come up with some mechanisms to stop the flow of black money into the pool.

Overall, I have watched some videos and a fictional series too, but not a full series, just a few videos, and in that video, I can understand how people used to wash their money, mostly in fiat, because it is easy to move money and it is easy to lend people money when it is in fiat. And I also agree that the easiest and preferred way to wash the money is by lending it to others and then buying products and services via gift cards or some other feature.

[Findingnemo]

There is no denying that the reason most of the Bitcoin mixers were closed/shut was due to the trace of money laundering activities found on their platform For example Chipmixer the biggest mixer I have ever known closed recently due to the reason but as said by OP its not suitable that is why were seized by governments.

But as far as I know, money laundering in fiat is easy and can be no trace found like we see on the bitcoin ledger still the governments keep complaining that bitcoin is only used for criminal activities.

Here is an interesting fact

The estimated amount of money laundered globally exceeds 2% to 5% of the global GDP, or approximately $800 billion to $2 trillion in just one year.

Let's say 1 Billion happened via mixing what about the remaining 799 Billions? How long the government can blame the cryptocurrency for the incompetence of AML?

[Hamza2424]

Most of the business which are in money laundering are no longer using these Mixers. They have much better options to use rather using Bitcoin. They can simply buy XMR (Monero) and use that as it's a private blockchain. No transaction can be tracked. And then you can even use Monero to then get it converted into real fiat money. And yes, that's true. Mixers alone are no longer suitable for money laundering.

I had a few time debates with the mixers and their dark use case but ended up with a person who really wants to under money has the best option to use the cash, where tracking of the funds becomes near to impossible as there is no digital record. In the counter question for the few times with Bitcoin a source of money laundering I had so conversation on why Bitcoin can be a dark dream to the money lenders. In some reported cases the media used mixers money laundering was done and there was a lot of evidence as well but I did ignored them on some level.

I was totally unaware of the XMR (Monero), seems like as sir you have said there can be potential money laundering usecase why they designed their blockchain on that scale, I had heard about Stealth Addresses and Kovri features on the XMR but I did never studied them. What can be their primary purpose to design a private blokchain,with such privacy, obviously a person with white money who just need privacy wont use it as he don't need to hide his assetson that scale because his motive can be to just not get extra attention on his funds.

[pinggoki]

Most of the business which are in money laundering are no longer using these Mixers. They have much better options to use rather using Bitcoin. They can simply buy XMR (Monero) and use that as it's a private blockchain. No transaction can be tracked. And then you can even use Monero to then get it converted into real fiat money. And yes, that's true. Mixers alone are no longer suitable for money laundering.

Mixers are old school, I don't even know why you want to risk tainting your coins in there when Monero does the job for you at a much more efficient way and less hassle because it's pretty straightforward since it's just like any crypto albeit much more private.

Let's say 1 Billion happened via mixing what about the remaining 799 Billions? How long the government can blame the cryptocurrency for the incompetence of AML?

As long as it benefits them, they will blame cryptocurrency or better yet they will continue to use cryptocurrency as a scapegoat for their incompetences because it's that easy to blame it compared to taking responsibility in their incompetence, this shouldn't be any surprise to you since you've been in crypto space for a long time already.

[Z-tight]

I hope one day these mixers will not be used or preferred by those black money holders who wanted to white their money.

There is no tainted or clean BTC, don't believe that BS! It is just terms that anti bitcoiners use to attack the BTC network, all BTC's are the same. Mixers are just tools in themselves, anyone can decide to use them, if you care about your privacy mixers and CoinJoin should be tools you use often, than doesn't make you a money launderer, the same way you're not a criminal if you use a dollar bill that was previously used by a criminal.

I hope these mixers will come up with some mechanisms to stop the flow of black money into the pool.

You are suggesting that mixers hire blockchain analysis companies to spy and blacklist certain UTXO's, and also treat them as non-fungible, just the way Wasabi does, because that's the only way what you suggest can be achieved. Take note that if a mixer spies on their users UTXO, then nobody who cares about their privacy would choose to use them again because they no longer have the privacy which they seek.

[Nwada001]

I think I have engaged in discussion regarding this same issue on several occasions where I tried to explain that bitcoins or any other crypto is not the stone head behind the increase in illegal activities going on today in the world, but oppositors always think otherwise. Mixers not being enough to completely launder money is just as true as crypto alone not being enough to be used to finance every illegal purchase and other financial crimes as they have deemed it to be.

Many people always believe that the birth of crypto comes with a lot of money laundering opportunities and promotes criminal activities to the top. It's an undeniable fact that they are being used for some sort of money laundering, but that's not entirely the fault with this. Like I have always explained, even before the birth of cryptocurrency, the word money laundering was already in existence, and people were really doing it perfectly without being noticed or traced.

It's actually nice that someone from a top regulatory body happens to view things in a different way than what the majority has been trying to paint all mixers and crypto transactions as the reason for money laundering increase.

[panganib999]

Mixers in the past have been used alright, but the cooperation that current mixers offer to prevent money laundering and the birdbath of ill-gotten crypto has led to them becoming more of a deterrent to money laundering than something that promotes it. exchanges and mixers are in contact with each other and in a simple email, these exchanges could warn every mixer out there to freeze assets from bitcoins/cryptocurrencies coming from particular addresses. Which could easily thwart the plans of these people from the get-go and even lead to the return of the money they stole from the ones they took it from.

[PX-Z]

Mixers in the past have been used alright, but the cooperation that current mixers offer to prevent money laundering and the birdbath of ill-gotten crypto has led to them becoming more of a deterrent to money laundering than something that promotes it.

It happens when regulations become more hectic and more exchanges was hacked, so mixers is the hackers way to escape from the monitors of authorities. And it is pretty normal to any mixers to get attacked by the authorities later on.

Yes, if any mixer will work with exchanges by blocking the addresses labeled for hacks i guess mixer getting hunt by authorities will be minimized.

[tread93]

Wow, this was a lot and very interesting to read. I get more and more interesting with the methodology that the money landerers use, its fascinating. So much goes into this. In most cases it's also interesting that mixers are deemed as tainted coins, I mean naturally if you have nothing to hide then why go though such extreme measures? If you do then surely you're up to something and that's easy to get on the radar with the FBI or other governments. I wonder how many times stolen coins and traded in order to have "washed coins" truly blockchain has only hurt money launderers. At least with cash they could get rid of the trail, with crypto they lead others back to themselves despite all their attempts to hide it..

[GreatArkansas]

Mixers in the past have been used alright, but the cooperation that current mixers offer to prevent money laundering and the birdbath of ill-gotten crypto has led to them becoming more of a deterrent to money laundering than something that promotes it.

It happens when regulations become more hectic and more exchanges was hacked, so mixers is the hackers way to escape from the monitors of authorities. And it is pretty normal to any mixers to get attacked by the authorities later on.

Yes, if any mixer will work with exchanges by blocking the addresses labeled for hacks i guess mixer getting hunt by authorities will be minimized.

This is too centralized though.
It's just sad that these Bitcoin mixers are being used for such illegal things.
I watched the video and at the end of the video, the guy mentioned that using cryptocurrency like Bitcoin can be also the future of dirty money.