While I’m only halfway through reading “Tracers in the Dark: The Global Hunt for the Crime Lords of Cryptocurrency,” by Andy Greenberg, I’m posting today because it fits so perfectly with WatchingTheHerd’s book review of “Going Infinite.” Both books are focused on cryptocurrency exchanges.
One of the attractions of cryptocurrency to the underworld of criminal activity and money laundering was said to be its anonymity. Although all transactions were permanently etched into the blockchain records, the identities of the participants were obscured.
“Tracers in the Dark” is the story of how experts in academia and government law enforcement (IRS, FBI, Justice Department, etc.) discovered how to trace the blockchain records to their individual participants. In the process, they discovered the identity of one of the earliest crypto exchange organizers, “Dread Pirate Roberts,” who was sentenced to two life sentences without parole. Also discovered that two separate members of law enforcement teams had been stealing cryptocurrency from exchanges for years under the cover of investigating them.
One lesson in the book is that the internet is forever. A tip led to the discovery that a very canny organizer of a criminal exchange had posted photos of himself at age 17, connecting him to the identity of his much more cautious adult self.
Another lesson is that nothing connected to the internet is truly safe from either thieves or government investigators. Any security loophole can be exploited. A thief who is located in Russia can’t be extradited for prosecution. (Even if his server is located in the U.S. because it’s safer than Russia.)
Although the book is about cryptocurrency exchanges, I wonder whether our conventional financial institutions (e.g. Fidelity, Vanguard, the banks, etc.) are equally vulnerable. In the conventional financial world, losses are insured by the FDIC and SIPC, so we are supposedly safe.
However, a friend’s wife was tricked by a spoofer into somehow allowing him to control her computer (I’m not clear about the details.) The spoofer then used the password to steal $20,000 from their Fidelity account. Fidelity refused to reimburse this.
I recommend “Tracers in the Dark” for anyone who enjoys reading about step-by-step investigations. By the way, I still think that cryptocurrency is a speculative trap for the unwary and wouldn’t touch it with a 10 foot pole.