TL;DR: Prompted by cyber security company McAfee, LLC, Dutch Fiscal Information and Investigation Service (FIOD) announced, in cooperation with Europol and Luxembourg law enforcement, their shutting down of BestMixer.io, a custodial crypto mixing service. It’s a challenge for privacy advocates who wish to provide greater anonymity while not running afoul of often slippery anti-money laundering (AML) laws.
Custodial Crypto Mixing Service Taken Down by Intl Law Enforcement
Characterizing their action as dealing “a severe blow to the concealment of criminal flows of money by mixing cryptocurrencies such as bitcoins. Six operational servers have been dismantled and seized in the Netherlands and Luxembourg,” an FIOD post boasted. “The reason for the investigation was a report from cyber security company McAfee.”
John Fokker, Head of Cyber Investigations for McAfee Advanced Threat Research, explained, “A closer inspection of the Bestmixer site revealed that its website was hosted in the Netherlands. McAfee ATR contacted the Financial Advanced Cyber Team (FACT) of the Dutch anti-Fraud Agency (FIOD) of Bestmixer.io’s location. FACT is a team that is specialized in investigating the financial component of (cyber)crime. A yearlong International investigation led to the takedown of Bestmixer’s infrastructure,” Fokker stressed.
Europol added context, noting, “Bestmixer.io was one of the three largest mixing services for cryptocurrencies and offered services for mixing the cryptocurrencies bitcoins, bitcoin cash and litecoins. The service started in May 2018 and achieved a turnover of at least $200 million (approx. 27,000 bitcoins) in a year’s time and guaranteed that the customers would remain anonymous.” Underlining the custodial nature of BestMixer’s business model, Europol continued, “The Dutch FIOD has gathered information on all the interactions on this platform in the past year. This includes IP-addresses, transaction details, bitcoin addresses and chat messages. This information will now be analysed by the FIOD in cooperation with Europol and intelligence packages will be shared with other countries.”
Probably Used to Conceal and Launder Criminal Flows of Money
“People who use a mixing service probably do so to increase their anonymity,” FIOD insisted. “The investigation so far shows that many of the mixed cryptocurrencies have a criminal origin or destination. In these cases the mixer was probably used to conceal and launder criminal flows of money.”
And while the word “probably” should stick out to anyone concerned with accusations of criminality, it’s at least clear BestMixer.io was poking the bear. Being coy about anti-money laundering evasion is a great way to attract law enforcement. “The legality changes when a mixing service advertises itself as a success method to avoid various anti-money laundering policies via anonymity. This is actively offering a money laundering service,” Fokker urged.
It is interesting how the only option for such a service, in law enforcement press releases, is crime. Phrasing as “dirty” and then “clean” serve a clear purpose, and ironically muddies those who might have used BestMixer.io for greater privacy alone, no criminal intent. Where it might have erred is in flirting with AML language and having servers participating in transaction making.
Are There Viable Alternatives?
Services of a similar variety such as CashShuffle for bitcoin cash (BCH) have a server, but it merely passes messages as directed by users. It doesn’t hold users’ information. It’s basically described as a coordination bot. So why even consider relative anonymity when it comes to crypto? What’s the big deal? Perhaps the greatest irony of public blockchains, distributed ledgers, is the ease with which transactions can be tracked. If anyone can link a user’s identity to just one transaction, essentially all the others in a wallet are game. Imagine the distressed wife or girlfriend attempting to evade a violent, jealous mate for example. Could they benefit from better anonymity?
CashShuffle developer Jonald Fyookball asked CoinSpice, “Do you really want your neighbors knowing all of your transactions? On a transparent ledger like Bitcoin, privacy is really bad by default. Without a tool like CashShuffle providing ‘basic privacy,’ it’s pretty easy for anyone to analyze your transactions and find out a lot about your spending habits and also your holdings,” he warned. Fyookball prefers to call what CashShuffle does “basic privacy for everyday users,” a kind of middle ground.
And “then there is the whole fungibility issue,” he continued. “If coins aren’t fungible, it hurts the currency. You wouldn’t want your fiat notes confiscated just because there’s trace amounts of cocaine on them, same here.” Indeed, an older study, “Cocaine Contamination of United States Paper Currency,” Jonathan Oyler, et al, in the Journal of Analytical Toxicology, underscored Fyookball’s point. “Cocaine was present in 79% of the currency samples analyzed,” researchers found. “These results indicated that cocaine contamination of currency is widespread throughout the United States and is likely to be primarily a result of cross-contamination from other contaminated currency and from contaminated money-counting machines.”
Even members of the Ethereum community have begun grappling with greater privacy for all the reasons stated. No less than co-founder Vitalik Buterin recently mused, “The main use case I’m thinking of is a one-off send from one account to another account so you can use applications without linking that account to the one that has all your tokens in it,” pointing to a Minimal Mixer he’s been working on.
DISCLOSURE: The author holds cryptocurrency as part of his financial portfolio, including BCH.
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