Bitcoin Fog Orchestrator Apprehended After 10yr Search

Good or bad, all things must come to an end.  After a run lasting an entire decade, authorities in the United States have finally named and apprehended the individual responsible for the popular ‘Bitcoin Fog’.

“Analysis of bitcoin transactions, financial records, Internet service provider records, e-mail records, and additional investigative information, identifies ROMAN STERLINGOV as the principal operator of BITCOIN FOG.”

What is Bitcoin Fog?

The IRS describes Bitcoin Fog as an ‘illicit Bitcoin money transmitting and money laundering service’.  Such services are often referred to as ‘tumblers’ or ‘mixers’.

Essentially, these services allow for the obfuscation of identifying data surrounding digital assets such as Bitcoin.  The ability to ‘mask’ the origins of Bitcoin addresses, allow for money to be easily laundered and used for nefarious activity.

This capability is achieved through a process in which similar transactions are grouped/mixed together.  While the means to achieve this is complicated, the end result is that after a batch of transactions have been ‘mixed’, one can no longer associate a particular transaction with any one sending address – hiding the transaction participants in the process.

Bitcoin Fog described the process as, “mix(ing) up your bitcoins in our own pool with other users…get paid back to other accounts from our mixed pool…can eliminate any chance of finding your payments and making it impossible to prove any connection between a deposit and a withdraw inside our service.”

The Charges?

Due to the aforementioned service and actions taken by Sterlingov surrounding its operation, U.S. authorities have laid a series of charges against him.  These include the following,

• Laundering of Monetary Instruments
• Operating an Unlicensed Money Transmitting Business
• Money Transmission Without a License

What is intriguing about this particular take-down, is the fact that the IRS was able to track down Sterlingov with the very technology that fueled his obfuscation service.  The process of doing so is very extensive, with the IRS analysing blockchain data dating back to 2011.

By the Numbers

With Bitcoin Fog remaining operational for much of the past decade, the value of digital assets to find their way through its ‘mixer/tumbling' service is substantial.  The IRS states that it was able to determine the scope of transacted value through extensive blockchain analysis, resulting in the following figures.

Total Bitcoin laundered?             1.2million

Total Bitcoin worth?                     $336million at time of payments

Total pocketed by Sterlingov?     $8 million (not including recent appreciation in value of BTC)

Of this money laundered, it is believed that nearly $80 million is associated with various other infamous platforms such as,

• Agora
• AlphaBay
• Evolution
• Silk Road

Cumulatively, there were 51 services similar to those noted above which received funds from Bitcoin Fog over the years.