Master Card subsidiary CipherTrace has entered the criminal case of United States v. Roman Sterlingov by submitting a report supporting the defense. The case revolves around Bitcoin Fog, a cryptocurrency mixing service accused of participating in illegal money laundering transactions amounting to $336 million.
Sterlingov, the alleged founder of Bitcoin Fog, was arrested in April 2021 after a decade-long investigation that relied heavily on evidence provided by blockchain investigation organization Chainalysis. However, Sterlingov’s defense team, led by Tor Eklund and Michael Hassard, argues that the prosecution’s case is based on flawed data analysis and unsupported claims.
In their report, CipherTrace Director Jonelle Still disputes the efficacy of the data obtained by the prosecution from Chainalysis. Still asserts that the data cannot be confirmed on-chain and states, “The blockchain forensics and tracing tools used in this case were misused to erroneously conclude that Mr. Sterlingov was the operator of Bitcoin Fog when no such evidence exists on-chain.”
The defense team points out that Chainalysis failed to trace transactions back to Sterlingov and instead provided an opinion on the matter of who founded Bitcoin Fog. They highlight a specific incident in 2019 when IRS agents allegedly messaged Bitcoin Fog’s helpdesk inquiring about using the service to launder proceeds from selling a drug called “Molly.” However, Eklund and Hassard argue that Bitcoin Fog never responded to the message, and the government never actually sold the drug for Bitcoin with the intent of laundering the proceeds through the service.
CipherTrace’s report raises concerns about the reliability of the Chainalysis data, questioning its accuracy and completeness. They suggest that blockchain forensics should only be used as an investigative tool and are insufficient as primary evidence. Still recommends an independent audit of Chainalysis and its methodologies to prevent wrongful arrests based on flawed analysis.
As Sterlingov’s assets have been seized by the United States, his defense team and CipherTrace have been providing pro-bono assistance to aid in his legal defense.
In conclusion, the involvement of CipherTrace in the case United States v. Roman Sterlingov adds a new dimension to the ongoing trial. The defense team’s argument challenges the validity of the data provided by Chainalysis, raising doubts about the prosecution’s claims. With an increasing reliance on blockchain forensics and tracing tools in criminal cases, the report prompts a critical examination of the methodologies employed by organizations like Chainalysis. The outcome of this case may have significant implications for future investigations involving cryptocurrencies and blockchain technology.
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