Is Crypto the Funding Mechanism for Bad Actors?
December 6, 2023
This essay is the work of a dumb dinobaby. No smart software required.
Allegations make news. The United States and its allies are donating monies and resources to Israel as they fight against Hamas. As a rogue group, Hamas is not as well-funded Israel and people are speculative about how it is financing its violent attacks. The Marketplace explains how the Palestinian group is receiving some of its funding and it’s a very obvious answer: “Crypto Is One Way Hamas Gets Its Funding.” David Brancaccio, host of the Marketplace Morning Report, interviewed former federal prosecutor and US Treasury Department official and current head of TRM Labs, Ari Redford. TRM Labs is a cryptocurrency compliance firm. Redford and Brancaccio discuss how Hamas uses crypto.
Hamas is subject to sanctions from the US Treasury Department, so the group’s access to international banking is restricted. Cryptocurrency allows Hamas to circumvent those sanctions. Ironically, cryptocurrency might make it easier for authorities to track illegal use of money because the ledger can’t be forged. Crypto moves along a network of computers known as blockchains. The blockchains are public, therefore traceable and transparent. Companies like TRM allow law enforcement and other authorities to track blockchains.
The US Department of Justice, IRS-CI, and FBI removed 150 crypto wallets associated with Hamas in 2020. TRM Labs is continuously tracking Hamas and its financial supporters, most appear to be in Iran. Hamas doesn’t accept bitcoin donations anymore:
“Brancaccio: I think it was April of this year, Hamas announced it would no longer take donations in bitcoin.. Perhaps it’s because of its traceability? Redbord: Yeah, really important point. And that’s essentially what Hamas itself said that, you know, law enforcement and other authorities have been coming down on their supporters because they’ve been able to trace and track these flows. And announced in April that they would not be soliciting donations in cryptocurrency. Now, whether that’s entirely true or not, it’s hard to say. We’re obviously seeing at least supporters of Hamas go out there raising funds in crypto.”
What will bad actors do to get money? Find options and use them.
Whitney Grace, December 18, 2023
Crypto and Crime: Interesting Actors Get Blues and Twos on Their Systems
January 31, 2023
I read a widely available document which presents information once described to me as a “close hold.” The article is “Most Criminal Crypto currency Is Funneled Through Just 5 Exchanges.” Most of the write up is the sort of breathless “look what we know” information. The article which recycles information from Wired and from the specialized services firm Chainalysis does not mention the five outfits currently under investigation. The write up does not provide much help to a curious reader by omitting open source intelligence tools which can rank order exchanges by dollar volume. Why not learn about this listing by CoinMarketCap and include that information instead of recycling OPI (other people’s info)? Also, why not point to resources on one of the start.me pages? I know. I know. That’s work that interferes with getting a Tall, Non-Fat Latte With Caramel Drizzle.
The key points for me is the inclusion of some companies/organizations allegedly engaged in some fascinating activities. (Fascinating for crime analysts and cyber fraud investigators. For the individuals involved with these firms, “fascinating” is not the word one might use to describe the information in the Ars Technica article.)
Here are the outfits mentioned in the article:
- Bitcoin Fog – Offline
- Bitzlato
- Chatex
- Garantex
- Helix – Offline
- Suex
- Tornado Cash – Offline
Is there a common thread connecting these organizations? Who are the stakeholders? Who are the managers? Where are these outfits allegedly doing business?
Could it be Russia?
Stephen E Arnold, February 1, 2023
FTX: What Does B Stand For?
December 2, 2022
I am not a krypto kiddie. After the mysterious Nakamoto white paper became available, I made an informed judgment: Bad actors will love this crypto thing. My hunch was correct. The meltdown of a crypto wizard and his merry band of tea totaling worker bees have demonstrated that cyber fraud can be entertaining.
I read “Does B Stand for Bankman-Fried or Bankruptcy?” The write up asks a simple question. I noted this passage from the “real” Silicon Valley write up:
SBF said FTX failed on risk management and he didn’t “knowingly co-mingle funds.”
There you go.
Now what does B stand for? Here are my suggestions:
bamboozle – to rip off, fool, or deceive
bane – a source or ruin, harm, or evil
baseborn – a nice way to question one’s family position in society
bebotherer – one who brings trouble
besotted – drunk and incoherent
bonkers — a few cans short of a six pack
brock—a nasty, little, furred creature
I am leaning toward bamboozle but I think brock has a certain charm. Perhaps a combo; to wit:
The brock bamboozled himself and others.
Close enough for horseshoes as the “we’re not talking” analytics folks like to say among friends at lunch.
Stephen E Arnold, December 2, 2022
Simplifying the Geometry of Conscience
November 14, 2022
My first brush with crypto currency was a request to include the topic in a lecture for an outfit running international training programs for law enforcement and intelligence professionals. In 2013, I was in my first year of retirement and interested in what I called CyberOSINT. My definition of the term pivoted on the companies providing tools and software to deal with was grouped under the category of cyber crime. A decade ago, cyber crime was big, but it was propelled by what now seems to have been bad actor minnows.
The hot topics were the Dark Web, forums offering tips and tricks for hacking, and CSAM (child sexual abuse material). Digital currency, specifically Bitcoin, was the lubricant for cyber crime. Therefore, my team and I had no choice but take a look at the Nakamoto white paper, poke into the universities in England beavering away on techniques to deanonymize individual transactions, and the early research efforts of everyone’s favorite online bookstore Amazon. We attended meet ups about digital currency and spoke with seemingly well meaning people who were excited about doing money things without annoying intermediaries and regulatory authorities.
It became clear at least to me and my team that digital currency would become a replacement for paper and coin currencies because [a] money costs a lot to produce, manage, and make counterfeit resistant and [b] values could be whipped up using the juices that bad actors, money launderers, and financial “innovators” have pumping through their veins.
Today digital currencies have become a big financial play. It works… for a while. Then like the tragedy of the commons, the open green field is trashed. I thought about the current big time mess a whiz kid has created. The scale of the fraud makes those early players look less like minnows and more like clueless paramecia with math skills. “Sam Bankman-Fried and the Geometry of Conscience” is an interesting essay. However, it is difficult for a simple and somewhat dull person like myself to understand.
The write up says (and I urge you to read the complete 1,400 word essay. I want to cite one passage, if I may:
On reflection, maybe I’d just try to convince SBF to weight money logarithmically when calculating expected utility (as in the Kelly criterion), to forsake the linear weighting that SBF explicitly advocated and that he seems to have put into practice in his crypto ventures. Or if not logarithmic weighing, then at least some concave utility function—something that makes, let’s say, a mere $1 billion in hand seem better than $15 billion that has a 50% probability of vanishing and leaving you, your customers, your employees, and the entire Effective Altruism community with less than nothing.
Interesting, right.
Here’s my take. The SBF innovator attended MIT. In theory, he was exposed to MIT thinking, which as you may recall, involved taking money from everyone’s favorite poster child for questionable behavior Jeffrey Epstein. Several questions:
- What’s up with an MIT education and inculcation of such quaint concepts as moral behavior?
- Why are individuals willing and able to commit financial fraud when it is comparatively easy to deanonymize some crypto activities?
- Do we need big thoughts like “linear and concave utilities” to explain criminal behavior?
My take. Effective altruism is word salad. Say crypto to me I think of cyber crime. End of story. No Hopf fibration or wordsmithing needed, thank you very much.
Stephen E Arnold, November 14, 2022
Bitcoin Dip: Buy a Dubai Villa Today?
June 9, 2022
Now there is an easy way to buy property with Bitcoin—if one is looking to settle in Dubai, that is. The International Business Times reveals, “Coinsfera Makes It Easy to Buy Real Estate in Dubai with Bitcoin.” Reporter Anjali Kochhar writes:
“If a buyer is not a UAE national, then they need to have an original ID or passport to buy properties in Dubai through Bitcoin. Meanwhile, the payment through Bitcoin will be considered in US Dollars or Dirhams. The crypto exchange will help the buyers with selecting different properties at premium locations in Dubai by assigning real estate agents who will help in property dealing. After that, the company will arrange a meeting for further dealing where you can negotiate and finalize the deal. Once all things are decided, buyers can transfer the capital amount in Bitcoin through their wallet. The buyers can have possessions of the villa right after the transfer of Bitcoins. ‘Coinsfera offers luxurious apartments in the great buildings of Dubai. We will not just save your time but also your cost in the transaction process. You just have to select your apartment and we will take care of the rest,’ the statement read.”
Sounds convenient. But who are the customers? We are not sure, but some people in Russia, the Middle East, and Monaco may be interested. The service’s launch follows the passage of recent legislation designed to position the Dubai Emirate as a leader in crypto currencies, NFTs and any other virtual assets that might come along. Founded in 2015, Coinsfera is a Bitcoin exchange firm based in Dubai that also serves customers in Istanbul, London, and Kosovo.
Cynthia Murrell, June 9, 2022
CoinMarketCap User Data Leaked
November 3, 2021
The IRS may be interested in these data. Many turn to crypto currency because it is (nearly) untraceable. The major website where users go to keep up to date on crypto currency markets, however, has proven to be less secure. Gadgets360 reports, “Data of Over Three Million CoinMarketCap Users Breached, Crypto-Tracker Acknowledges.” We learn:
“Data of over three million CoinMarketCap (CMC) users was leaked earlier in October, the crypto tracker confirmed. Every day, over 27 million people from the US, India, and Japan among other nations visit the platform to price-track and stay updated on cryptocurrency, a report by statistics firm HypeStat claimed recently. This data breach comes at a time when cyber-attacks specifically targeting the crypto-community are rising in numbers, worldwide. Despite several nations still being skeptical about legalizing crypto currencies, the crypto space is witnessing rapid expansion in many parts of the world. Registered email addresses of 3,117,548 CMC users were unlawfully obtained and uploaded on hacking forums by nefarious cyber criminals on October 12, CryptoPotato reported earlier this week. These email ids are now being traded on the dark web. CMC has acknowledged this data breach while noting that the passwords of these leaked email addresses remain safe.”
We suppose that is something to be grateful for. CMC insists the data leak was not on their own servers, and is still investigating what went awry. Writer Radhika Parashar reminds us this is not the first time a crypto firm has been breached, pointing to BitMEX and Ledger as examples. Also, a recent Business Insider report identifies 32 fraud and hacking attacks on crypto targets so far this year to the tune of nearly $3 billion. The same study states the number of attacks is growing by 41% each year. Ah, secure crypto.
Cynthia Murrell, November 3, 2021
Why Big Tech Is Winning: The UK Admission
August 31, 2021
I read “UK’s FCA Say It Is Not Capable of Supervising Crypto Exchange Binance.” This is a paywalled story, and I am not sure how much attention it will get. As Spotify is learning from locking up the estimable Joe Rogan, paywalls make sense to a tiny slice of one’s potential audience.
The story is an explanation about government helplessness when it comes to fintech or financial technology. The FCA acronym means Financial Conduct Authority. Think about London. Think about the wizards who cooked up some nifty digital currency methods at assorted UK universities less than one hour from the Pickle. Think about the idea that a government agency with near instant access to the wonks at the National Crime Agency, the quiet ones at Canary Wharf, and the interesting folks in Cheltenham. Now consider this passage from the write up:
… the Financial Conduct Authority said that Binance’s UK affiliate had “failed to” respond to some of its basic queries, making it impossible to oversee the sprawling group, which has no fixed headquarters and offers services around the world. The admission underscores the scale of the challenge facing authorities in tackling potential risks to consumers buying frequently unregulated products through nimble crypto currency businesses, which can often circumvent national bans by giving users access to facilities based overseas.
Hello? Rural Kentucky calling, is anyone at work?
Let’s step back. I need to make one assumption; that is, government entities’ have authority and power. What this write up makes clear is that when it comes to technology, the tech outfits have the authority and the power.
Not good in my opinion for the “consumer” and maybe for some competitors. Definitely not good for enforcement authorities.
Who finds sun shining through the clouds after reading this Financial Times’s story? I would wager that tech centric outfits are thinking about a day or more at the beach. No worries. And look. Here comes Snoop Dog handing out free beer. What a day!
Stephen E Arnold, August 31, 2021
Cyber Crime and Crypto Currency: There Is a Link? Really?
July 15, 2021
I read a remarkable report from the diary of Captain Obvious. The entry was “Quick Take: How Cryptocurrency Turbocharged the Cybercrime Racket.” I was stunned to learn that paying for contraband, stolen videos, and Crime as a Service was helped out with allegedly anonymous digital payments “turbocharged the cybercrime racket.”
The write up reports:
Bitcoin and other cryptocurrencies, along with the exchanges where they can be traded anonymously, have emerged as key tools for the cyber extortionists.
The article then explains how to use cryptocurrency for cyber crime, explains why bad actors love money flows which sidestep traditional financial institutions, an estimate of the amount of money stolen using cryptocurrency, a comment about how bad actors obtained payment in the pre-bitcoin days, a comment about tracing digital currency transactions, some law enforcement successes, and what steps might address this issue.
Who knew? Maybe the more than 60 vendors engaged in cyber security, the dozens of vendors monitoring obfuscated forums, and savvy bad actors who jumped at the opportunity cryptocurrency created for mixers.
It is outstanding that the Seattle Times, home of the security giant Microsoft, has revealed this startling connection between obfuscated, instant monetary transactions designed to avoid regulatory requirements of outfits like major US banks.
Pulitzer time? Absolutely. Next the hard hitting news team will report on the sun rising each morning in Seattle.
Stephen E Arnold, July
Cryptocurrency Competition at the Tallest of Ivory Towers
December 7, 2020
Ah, what better use of the finest in education than financial manipulation? We learn from cryptocurrency and Web 3.0 news source Decrypt, “Oxford, Cambridge Students Compete to Make Money on Crypto Markets.” The competition was put to math and computer science students at the two prestigious UK universities by crypto algorithmic trading firm APEX:E3. The firm also brought Coinbase, FTX, SIX Digital Exchange, LMAX Digital, and ConsenSys in on the project. Reporter Robert Stevens writes:
“Since November 16, the students have been competing to make the most money from crypto exchanges Coinbase Pro and FTX, according to a press release APEX:E3 pushed out this morning. APEX:E3 said that students have already spent their days conjuring up algorithms that incorporate technologies and concepts as diverse as machine-learning, neural networks, and whale order trading. In return for their toils, APEX:E3 is providing Oxford and Cambridge students from math and computer science departments access to its APIs, technical support, mentorship, and an undisclosed amount of ‘seed funding.’ … When the competition concludes at some point next month, the clocks will stop and a panel of ‘industry leading judges’ will rate the teams on their algorithms.”
The winning team gets to keep that mysterious amount of seed funding plus their returns. Cambridge is billing the project as a “fun and risk-free way” for these handpicked students to learn about the cryptocurrency industry. It also looks like a cheap and salary-free way for the industry to pick some of the brightest young minds for profitable ideas. A win-win, I suppose.
Soon Facebook’s carpe diem will arrive and more excitement shall ensue.
Cynthia Murrell, December 7, 2020
India Finance: Sharia Issue
March 9, 2020
DarkCyber found the information in “Sharia Fintech”: Startups Race to Tap Indonesia Growth by Aligning with Islam” suggestive. Is the information spot on? Possibly, the source makes a great effort to explain trust. The main point of the write up strikes DarkCyber as:
Winning over conservative Muslims like Iswara in the world’s most populous Muslim-majority country is both a challenge and multi-billion dollar opportunity for fintech firms that are riding its mobile internet boom and aim to sell financial services. Of Indonesia’s 270 million population, half lacks bank accounts but most now have mobile phones.
Implications? A handful.
Stephen E Arnold, March 9, 2020
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