The anonymity of cryptocurrency transactions, declared at the dawn of the “cryptocurrency era”, has long been conditional. And the point here is not in the principles of the system, but in the willingness of a part of the crypto community to share data with regulators and supervisory authorities. To some extent, the position is justified by commercial interests. But rather, it is due not only to the desire to survive in a competitive environment, but also to receive government preferences.
Chainalysis – Secret Service Agent
The fact that the analytical company Chainalysis is working with regulators and law enforcement agencies, providing personalized data of holders of cryptoassets, is not news to the community.
The company openly declares this on its
website:
“We provide data, software, services and research to government agencies, exchanges, financial institutions, insurance companies and cybersecurity companies … to uncover cybercrime.”
However, earlier this week, CoinDesk received materials that reveal another facet of Chainalysis’s cooperation with the criminal police. CoinDesk accessed documents from an undated Chainalysis presentation to Italian police after they were posted on DarkLeaks, a site that lets you buy and sell classified material online using cryptocurrencies. The materials allow us to conclude that Chainalysis secretly owns and administers the site walletexplorer.com.
Like other blockchain observers, the service provides users with a history of transactions of publicly available cryptocurrency addresses, grouped by address and wallet labeling. According to the Chainalysis presentation, suspects of wrongdoing can use the site to verify the progress of transactions, assuming that they will not leave a digital trail, as with the services of cryptocurrency exchanges.
As a result, Chainalysis obtains information about the IP addresses of the suspects and the relevant addresses of cryptocurrency wallets. The reverse mapping of the IP address to the address of the cryptocurrency wallet is also possible. The company says that the service allows searching not only for transactions with BTC, but also for any cryptocurrency, including XMR.
“Of the cases that Chainalysis worked on in collaboration with law enforcement, we were able to provide useful information in about 65% of the cases,” the Chainalysis presentation said.
Chainalysis cited the example of June 2020, when walletexplorer.com revealed the IP address of a ransomware suspect a few hours after it was suspected of depositing cryptocurrencies on the Huobi exchange’s OTC marketplace.
From the presentation it became known that in addition to this, the service records the data of users using wallets with simplified verification (SPV). To this end, Chainalysis is launching a series of monitored full nodes on the Bitcoin network. If a user of a “light wallet” connects to one of these nodes, the company receives information about the user’s IP address, the complete set of addresses in the wallet, the type and version of the wallet software, and other service information. What other sites for the collection of personal information are managed by Chainalysis is unknown.
SushiSwap Launchpad Miso – Return of Stolen Cryptocurrency for a Bowl of Soup
The fact that operations in the blockchain do not remain outside the control of stakeholders is confirmed by the event of last week – the hacking of the MISO site of the SushiSwap decentralized exchange for $ 2.9 million and the return of stolen tokens.
The attacker, officially called the “anonymous hacker”, injected malicious code into the platform’s frontend and replaced the auction wallet address with his own. Since it was revealed that the wallets used in the exploit were linked to the wallet addresses of the FTX and Binance cryptocurrency exchanges, the SushiSwap team requested assistance in providing information about the hacker’s KYC.
After identification, the SushiSwap team contacted him personally with a demand to return the stolen money. Knowing the hacker’s address, he was ordered to deliver food to his house – miso soup – as a psychological attack on the eve of negotiations.
“We thought the best way to get things done was to scare this guy and just make him send the money back.” said
one of the developers of the MISO platform. The idea worked.
Two “cherries on the cake”: Coibase and OpenSea
At the end of the topic on disclosing the facts of obtaining personal data about the owners of cryptocurrency instruments, we will give two more illustrative examples: Coibase and OpenSea.
Cryptocurrency exchange Coibase follows the path beaten by Chainalysis and successfully shares user data with government agencies at various levels. The exchange has developed a special analytical tool, Coinbase Analytics, which is in demand by the Secret Service, the Department of Homeland Security and the Internal Revenue Service. Despite constant criticism from the crypto community, Coibase is not going to stop mutually beneficial cooperation with the state, which gives it access to budget funding.
In the case of OpenSea, the company’s top manager Nate Chastain was suspected of conducting trading operations using inside information, the investigation process was initiated and carried out by the enthusiasts of the OpenSea community. Nate Chastain’s cryptocurrency wallet address has been de-anonymized, and transactions have been mapped to the addresses of the involved wallets. As a result, the suspicion was confirmed, and Nate Chastain was fired from the company.
Non-anonymous transparency
When performing transactions with cryptoassets, some users naively believe that they are joining a community independent of government regulation, in which the principles of decentralization and confidentiality are respected. However, in practice, this is not entirely true.
The advantages of blockchain technology, the immutability and transparency of the blockchain, have become the basis for the creation of tools for controlling events in the crypto space by the state, the judiciary and, possibly, other stakeholders. Like any “weapon of retaliation”, the vector of its use and consequences depend on the goal pursued.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
