Rumour has long been that Homeland Security in the United States has been interested in Bitcoin’s role in the buying and selling of drugs and other illegal goods and services, via the dark web in particular. However, a recent indictment form leaked from the US Department of Justice has solidified these rumours.
Digital currency task force
The indictment form concerns accused marijuana and cocaine dealer, David Ryan Burchard, and the activities of Matthew Larsen, a Special Agent with Homeland Security Investigations (HSI). The section in particular that has concerned many with an interest in hiding their cryptocurrency activities comes under the third section in this document, under the subtitle ‘Facts Establishing Probable Cause’. It says:
“I [Matthew Larsen] am part of a digital currency task force focused on identifying the use of digital currency to launder the proceeds of criminal activity. As part of this task force, I have been involved in several investigations into unlicensed digital currency exchangers and narcotics distributors on the dark web who use digital currency to receive payment for the sale of narcotics. These investigations have brought my attention to numerous individuals who have been cycling through large amounts of Bitcoin.”
There have been suggestions that this task force actually monitors the Blockchain in real-time for suspicious behaviour. In this case, “specifically, in or around March, 2015, I [Matthew Larsen] began investigating David BURCHARD based, in part, on his sale of millions of dollars of Bitcoins to an unlicensed digital currency exchanger. I was, and continue to be, unable to identify a legitimate source of BURCHARD’s large amount of Bitcoins.” This has led many to conclude that the task force is using a combination of public records and real-time Blockchain monitoring to fulfil their obligations.
For those who use Bitcoin for more nefarious reasons, this could come as a blow to the perceived anonymity and safety of the virtual currency. However, for the vast majority of users whose actions are all ‘above-board, they need not worry, as the US is only concerning itself with the narcotics-related Bitcoin transactions, that is, for the moment.
Following the forced closure of the exchange, ‘The Silk Road’, that ran on the TOR network, the ‘industry’ has been hit in quick succession by a number of actions that have attempted to curb the internet exchange of drugs. For those who have sought safety for their drug dealings on the ‘dark web’, this will only serve as further proof of the increasing grip states have over their activities.
In a statement to technology magazine, Motherboard, the Tor Project said of the claims that Carnegie Mellon University had co-operated with the FBI in an attempt to breach the network’s security: “the Tor network is secure and has only rarely been compromised. The Software Engineering Institute ("SEI") of Carnegie Mellon University (CMU) compromised the network in early 2014 by operating relays and tampering with user traffic. That vulnerability, like all other vulnerabilities, was patched as soon as we learned about it. The Tor network remains the best way for users to protect their privacy and security when communicating online.”
Furthermore, before that, in late 2013, it was learned that the FBI had installed malware on websites that were hosting child pornography through the taking over of the servers that were hosting it, further proving the United States’ global internet reach.
Could this spell the end of the narcotics exchange industry’s dealings on the TOR browser, or will it only serve as a token reminder of the great risks associated with being employed in such a highly-prosecuted industry?
The full indictment form can be read here. I highly recommend reading it.