The most common misunderstanding about bitcoin and other cryptocurrencies is that transactions are completely anonymous and cryptos are therefore popular with criminals. The first is incorrect, the second is Tracers in the Dark, by American tech journalist Andy Greenberg. A book about the hunt for „the crime lords of cryptocurrency”.
Cryptocurrency has great appeal to criminals. It has the speed and weightlessness of cashless money, without the disadvantage of bank transactions, which is that you have to identify yourself. Soon after bitcoin’s inception in 2009, a first marketplace on the ‘dark web’ was built, The Silk Road. It could not be found with a normal search engine, but with the Tor browser, which allows you to surf anonymously. Drugs were traded there with cryptos, among other things.
The Silk Road grew rapidly and the administrators felt safe. Initially, detectives also thought that there was little they could do about it. Both sides still had to understand how cryptocurrencies work, namely based on a public database with all transactions, the so-called blockchain. It’s a goldmine for a certain type of detective, who understands what to look for if you want to find out who is hiding behind the receiving addresses (a long series of letters and numbers) of the criminal proceeds.
Greenberg describes how the investigators have learned this through trial and error since 2013. His main characters like puzzles. One is a driven academic specializing in cryptography, the other an initially bored accountant in the financial investigation department. Supplemented with the type that prefers to kick in doors, but has discovered a cyber crime by chance. And then was seized by the possibilities, for example to roll up a worldwide child pornography network.
Greenberg makes the computer nerds cool. He shows how they work together and make use of each other’s inventions. Writing an exciting book about puzzling with a muddle of transactions from still anonymous persons is almost as admirable as the meticulous detective work itself.
‘Don’t shit where you eat’
At the beginning of the book, one of his main characters, the Dane Michael Gronager with a PhD in quantum mechanics, tries to discover the identity of the thief of 650,000 bitcoins from Mt. Gox, the most important crypto exchange until 2014. The software that Gronager develops for this lays the foundation for his company Chainalysis. The value of this is estimated in the last chapters above 8 billion dollars. It currently serves crypto exchanges, regulators and prosecutors worldwide.
We manage to identify the thief. It will then take years before it can be picked up. That’s because of something else this book showcases well: Russia’s role in the world of cybercrime. Illegal online marketplaces remarkably often require their users not to make Russian victims. This under the motto ‘don’t shit where you eat‘. As long as they don’t cause problems in Russia, cybercriminals will be left alone there. Before the invasion of Ukraine, this seemed to improve under American pressure, but now the opposite is true again. That makes some of the detective work unsatisfactory. One illegal marketplace is easily exchanged for the next, if all that digital detective work does not lead to prosecutions and seizures.
In most investigations, however, there is a crucial and hopeful moment, when the vague online identity of the criminal (‘Dread Pirate Roberts’ or ‘Alpha02’) takes on a face. The criminals also appear to be of a certain type. Sometimes with ideology (libertarian) and a kind of principles (‘no child pornography via my dark web’). Almost all of them are skilled programmers, who seem to enjoy the cat-and-mouse game.
A little mistake
In the case of the large online black market AlphaBay, new users received a welcome e-mail in which the e-mail address of the sender was visible in the metadata due to a flaw in the server design: Pimp_alex_91@hotmail.com. The server turned out to be in the Netherlands (and later moved).
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The Dutch police has an honorable supporting role in the book. The High Tech Crime Unit in Driebergen has been hunting the Hansa marketplace since 2016. In doing so, they see an opportunity to temporarily take over the management of Hansa. By allowing the drug trade to continue for a month, they can retrieve data from hundreds of users. They come up with a daring plan with the Americans: they wait to take AlphaBay offline until Hansa is in the hands of the police. For example, criminals who move their trade to Hansa fall into a trap.
Every technical trick of the police is followed by an answer from the criminals. They are getting better at covering their online tracks. ‘cryptomixers’ are being set up to chop up transactions on the blockchain. And a crypto coin (the Monero) especially to guarantee the privacy of users. This also means that the closer the stories get to the present day, the detectives provide less and less insight into their work. Greenberg struggles to unearth post-2020 details. The investigative services cannot afford a too current look behind the scenes.
A version of this article also appeared in the March 4, 2023 newspaper