Over a year Feds ran a bitcoin-laundering sting

Operation Dark Gold targeted dark web drug dealers, providing cash in exchange for contaminate cryptocurrency.

More than forty alleged dark-web drug dealers have been arrested as part of a sweeping federal effort represented by the Department of Justice as “the first nationwide undercover operation targeting dark web vendors.” The core of the operation was an online money-laundering business seized by agents from homeland security Investigations and operated as a sting for over a year. By providing cash for bitcoin, HSI agents were ready to establish specific drug dealers, ultimately tracing more than $20 million in drug-linked cryptocurrency transactions.

“For the past year, undercover agents are providing money-laundering services to those dark web vendors, specifically those involved in narcotics trafficking,” said HSI special agent in charge Angel Melendez, in a news conference earlier today. Melendez led the operation from new york.

The hijacked money-laundering service was offered across variety of different marketplaces, with agents claiming a minimum of some presence on AlphaBay, Dream Market, Wall Street, and others. within the past, law enforcement efforts have focused on taking down marketplaces in full, most notably silk road, silk road 2.0, and AlphaBay. but Melendez says his office has shifted focus to the individual dealers, who usually operate freelance of any single site.

“When we have a tendency to take down a dark net marketplace, these criminals will move to different marketplaces,” Melendez said. “So the focus of this operation was really the bad actors, the individuals utilizing the dark net to sell drugs.”


So far, prosecutions have been launched across nineteen states as a results of the operation, seizing more than $3.6 million in cash. the same raids seized massive quantities of Schedule IV pharmaceuticals — including 100,000 tramadol pills and over twenty four kilograms of xanax — as is typical of trade on dark net markets. Agents also recovered more than three hundred models of liquid synthetic opioids and roughly 100 grams of fentanyl. Further investigations are still in progress.

The success of the operation reflects the widespread adoption of anti-money-laundering practices among bitcoin wallet providers, that currently usually need the same know-your-customer disclosures as a traditional bank. the biggest bitcoin exchange to resist those measures, BTC-e, was shut down by an international law enforcement effort in july 2017, leaving drug vendors with few trusted choices for converting drug-linked bitcoin wallets into hard cash.

Melendez declined to offer specifics on how the department had joined consumer wallets to drug transactions, saying simply, “there are tools and technologies that law enforcement uses to conduct blockchain analysis.” (Public records show that HSI’s parent agency spent quite $58,000 on Chainalysis tools within the months leading up to the investigation.)

Still, Melendez emphasized that the open nature of the blockchain made it tough to hide drug money. “The biggest selling point for the blockchain is that it’s transparent. Everybody can see it and we can see it, too.”