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November 21, 2019
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Blockchain helps busts bad guys in darkweb shutdown – Lexology

The US Department of Justice has revealed a large worldwide operation which has led to the shutdown of a kid exploitation web site internet hosting greater than eight terabytes of kid pornography, making it one of many largest unlawful web site shutdowns ever.

The investigation has led to a whole lot of arrests over the US, United Kingdom, South Korea, Germany, Saudi Arabia, the United Arab Emirates, the Czech Republic, Canada, Ireland, Spain, Brazil and Australia. Further particulars of the investigation and arrests can be found in the unsealed grievance, titled “United States of America v Twenty-four cryptocurrency accounts“.

Known as “Welcome to Video” (WTV), the web site was a baby pornography market working out of South Korea that allowed customers to purchase content material with Bitcoin or add their very own content material. Users obtained a novel Bitcoin handle after they signed up, which was used to ship funds to purchase content material. More than 1.three million Bitcoin addresses had been related to the web site. Between 2015 and 2018, the web site had obtained over USD$350,000 value of Bitcoin over 1000’s of particular person transactions.

While this story has been reported on in The Australian (paywall), Daily Telegraph and numerous different shops in the mainstream media, virtually all references have missed the important thing level:

this bust wouldn’t have been attainable with out the clear, immutable register inherent in the Bitcoin blockchain.

In the phrases of Internal Revenue Service (IRS) Chief Don Fort:

“Through the sophisticated tracing of bitcoin transactions, IRS-CI special agents were able to determine the location of the Darknet server, identify the administrator of the website and ultimately track down the website server’s physical location in South Korea”

Blockchain evaluation firm Chainalysis introduced that it was concerned with the investigation and recognized a number of the strategies by which they had been capable of establish the web site’s customers, and finally allow police departments to make arrests.

In quick, utilizing the publicly listed Bitcoin pockets handle on the web site, Chainalysis was capable of analyse transaction exercise related to that account to construct the next graph exhibiting the stream of funds related to the web site handle:

After figuring out the addresses related to cryptocurrency exchanges which had despatched funds to WTF, authorities businesses contacted exchanges and obtained data regarding the accounts. Thanks to trade pushed regulation requiring cryptocurrency exchanges to carry out Know Your Customer (KYC) and Anti-Money Laundering (AML) processes, (facilitated by the AML/CTF Act in Australia) the id of the account holders on the exchanges could possibly be supplied to police.

Chainalysis acknowledged that for probably the most half, the data which businesses obtained from the exchanges was sufficient to establish WTV customers. Where it was not, the data supplied by exchanges was capable of be aggregated with different publicly obtainable information or company intelligence which led to the worldwide businesses having the ability to establish the remaining customers of this abhorent web site.

The previous focus of the “dark side” of cryptocurrency fully misses that cryptocurrency with immutable public ledgers is the worst system for unlawful worth switch and this takedown is an ideal instance of why. Had the customers of this web site pay in money or one other means, the evaluation which was obtainable in this case would by no means have been attainable.

Financing prison exercise with an system which leaves an immutable, irreversible and publicly accessible report is a horrible strategy to commit crime, and offers an accessible and low-price useful resource for regulators to research unlawful actions.

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