Leaked FBI Docs Show Just How Easily They Track Bitcoin - And The Untraceable Coin They're Frustrated With...

We've pointed out how the mainstream media's constant reference to Bitcoin being 'untraceable' just isn't true, and the FBI agrees - saying they're "far from being anonymous" and that there are also various types of software, open source and proprietary, that carry out an exhaustive exploration of transactions on their blockchain.

But one coin does qualify as 'untraceable' at least for now, and it's a thorn in the FBI's side as they admit to having an inability to detect the destination of the funds in operations when Monero (XMR) is used.

The FBI report appeared in a leaked document repository, and shows three cases involving Panamanian cryptocurrency exchange MorphToken. The document explains three cases of supposedly illegal exchanges of bitcoin (BTC) to monero (XMR) in said exchange house.

The leaked report is part of the documents released in Blueleaks, an extensive collection of police reports and government office documents published by the Anonymous group.

The FBI points out in the document that it evaluated actors in the dark web market (Darknet Market or DNM) that turned bitcoin into monero, allegedly unlawfully . The federal office rates monero as an enhanced anonymity cryptocurrency (AEC), implying that the aforementioned conversion prevents law enforcement officials from mapping the destination of the funds.

But That's Not Necessarily A Dead End...

If someone is converting Bitcoin to Monero, they're using an exchange. This means there's still a way to find what IP address is behind a Montro transaction.  Instead of following entries on the blockchain's ledger, they're looking at server logs of the exchanges used to execute the transactions.

The evaluation is highly reliable, says the FBI, and is based on that agency's research, analysis of blockchains, and the use of "proprietary software." Also, the FBI says in the leaked document that it used information from the MorphToken cryptocurrency exchange, which operates in Panama.

Given that after the conversion to monero, the FBI cannot detect the destination of the funds , this agency assumes that the DNM actors do not carry out such a conversion to "diversify their portfolio." The suspicion of illegal activities is based, according to the FBI, on two factors: the availability of information about the inability to trace the funds once converted to monero and the existing means to acquire them without providing user information.

In the first case addressed by the FBI, Bitcoin transaction fees processed by Cryptonia, which operates in the DNM, were detected between May and September 2019. These were sent to addresses associated with MorphToken, according to blockchain analysis and investigations. from the FBI. All bitcoin, says the FBI, was converted to monero.

In another case, bitcoin shipments from the sale of drugs to MorphToken were detected in November 2019, by 4 participants from the DNM. In this case, proprietary software that analyzes Bitcoin transactions and open source software for traceability of the Bitcoin blockchain were used. More recently, in January of this year, actors associated with the DNM Apollon sent at least 11 bitcoin to MorphToken for conversion to monero.

Reality Check...

We're for legitimate usage of cryptocurrencies, and believe it being used for illegal purposes does nothing but slow mass adoption, even though the reasoning behind this lacks any logic.

It's important to remind everyone that every government provides untraceable currency themselves - it's called cash. 

These days, physical cash can be turned digital easily via a pre-paid debit cards available at thousands of convenience stores, even many gas stations - with no ID needed.

So don't let any spin you find elsewhere convince you that cryptocurrencies provide a new level of anonymity. 

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Author: Adam Lee 
Asia News Desk