The IRS and other US authorities have seized $3.5 billion worth of cryptocurrencies.
This was revealed in the 2021 Crime Investigation report of the Internal Revenue Service, the investigative arm of the US tax collection agency.
Cryptocurrency seizures, 93% of the total
What is unusual about this figure is that it represents 93% of the total seizures made by the IRS-CI. Some of the most striking cases are cited in the report.
Silk Road
The most emblematic case is probably the $1 billion seizure in Bitcoin linked to the Silk Road case. The case actually dates back to November 2020. It is still the largest cryptocurrency seizure in US history.
Agents continued to “follow the money” of Silk Road even after the incarceration of founder Ross Ulbricht. They were able to track at least 54 transactions from the marketplace and trace them back to “Individual X”, a person whose identity was never disclosed.
Individual X‘s cooperation with the authorities led to the seizure of 69,000 Bitcoin, which were worth about $1 billion at the time. Today they are worth even more.
Bitcoin Fog
Another case worthy of attention is the arrest on 27 April 2021 of Roman Sterlingov, a 32-year-old Russian-Swedish citizen, who was accused of money laundering. According to the authorities, he operated Bitcoin Fog, a Bitcoin mixer used in numerous illegal activities such as drug sales on the darkweb, computer fraud, identity theft and various abuses.
According to the investigation, something like 1.2 million Bitcoin were passed through Bitcoin Fog with transactions worth a total of $335 million. Bitcoin Fog had been active since 2011, in the early days of Bitcoin, and was the second Bitcoin mixer case tracked down by authorities.
The Microsoft scam
This case concerns the sentencing of Volodymyr Kvashuk to 9 years in prison. He is a 26-year-old former Microsoft employee who swindled the company he worked for out of $10 million in gift cards.
The 26-year-old had access to these gift cards which he had practically stolen and sold on the web at reduced prices in exchange for Bitcoin. He then laundered the BTC by passing them through mixers. What gave him away was his tax return: after buying a $1.6 million property and a Tesla, he was unable to convince the IRS of the legitimacy of his wealth. This led to the discovery that 150,000 gift cards had been stolen.
Undercover investigations
The IRS has also used undercover agents to track down the illegal transactions involving cryptocurrency and Bitcoin. This demonstrates the effort needed to combat crimes that utilize cryptocurrencies.
For instance, in the case of Bitcoin Fog, the arrest of Roman Sterlingov came as a result of contact with an IRS agent posing as a drug dealer. The agent pretended to need to clean up the proceeds of drug dealing. Using Bitcoin Fog ensured that its founder did not ascertain the origin of the money put into the system.
Another case in point saw six people in trouble. They were exchanging fiat money for Bitcoin via ATMs in New Hampshire. An undercover agent, once again posing as a drug dealer in search of a way to clean the money, found that the exchange took place without the intermediaries ascertaining the origin of the funds.
Cryptocurrencies and crime – a challenge even for the authorities
One might think that these cases reinforce the belief that cryptocurrencies are the money of criminals. This is not really the case, as crypto has more than legitimate uses, from payments to fundraising and much more.
What is certain is that authorities inside and outside the United States are also coming to terms with their illicit use, and this poses new challenges, not least because of the complexity of the technology used.
The cases illustrated clearly demonstrate one thing: using cryptocurrencies and relying on the fact that they are anonymous or pseudo-anonymous does not prevent people from getting away with it.
And when it comes to collecting money, and therefore, unpaid taxes, the IRS doesn’t flinch. As Director Jim Lee said:
“Today’s criminals think we cannot catch them, but as evidenced by some of the great casework in this report, it is clear we can. I’m proud of our accomplishments from this year and look forward to continued successes in the future”.
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