The investigative department of the tax authorities FIOD stormed into 15 location in the Netherlands to arrest 10 suspects in a fully launched investigation to shut down criminals using Bitcoin to purchase illicit goods over the Dark Web.
The FIOD raided addresses in Rotterdam, Zoetermeer, Almere, Dordrecht, Zaandijk, Schiedam, s-Gravenhage and Putten. The authorities already processed the seizure of luxury items including expensive cars, cash, bank accounts and raw materials utilized to manufacture and distribute ecstasy.
According to the statement of the prosecutor, an increasing number of cyber criminals and drug traders have been using the Dark Web and bitcoin to settle trades of illegal items such as weapons, drugs, and banned substances.
The prosecutor further emphasized that the Dark Web does not guarantee anonymity and that is possible for the FIOD to track down the identities of traders online.
“However, the investigation showed that the Dark Web does not guarantee anonymity and that the FIOD can also do the detective work. FIOD and Public Prosecutor will share their findings with the Authority for Financial Markets and the Dutch Banking Association,” said the prosecutor.
There has always been a misconception amongst cyber criminals and cryptocurrency enthusiasts that Bitcoin is anonymous and cannot be tracked. However, Bitcoin by nature is transparent and its transactions can be tracked using analytics tools or blockchain explorers.
For example, in 2012, popular bitcoin trading platform Bitcoinica created by Zhou Tong lost millions of dollars worth of bitcoin in a series of hacking attacks.
After the incident, Zhou Tong immediately announced that he will discontinue all bitcoin-related projects and told its users on a bitcoin forum that he was grateful for the short term success his “experimental project” Bitcoinica was able to accomplish.
“It feels great to have an experimental project become the “best thing since sliced bread”, and run one of the most profitable businesses in a new economy. Bitcoinica has a total historical revenue equivalent to about 0.67% of the whole Bitcoin economy. Not even Apple can match this record in the real world economies,” Zhou announced in 2012.
However, in 2014, Zhou co-founded and launched an Australia-based bitcoin startup Coinjar, introducing various merchant-focused payment and exchange solutions. Since then, Zhou Tong has been heavily criticized for his wrongdoings and was deemed responsible for the theft of bitcoins in his previous venture, Bitcoinica.
On August 16, a new piece of evidence surfaced which provided links of suspicious transactions to Zhou Tong.
According to an analysis made on Blockseer, 40,000 bitcoin stolen from the Bitcoinica wallet which was held by Mt. Gox had multiple outputs which were sent to different addresses. The analysis followed the outputs of these addresses closely. By tracking down the addresses Zhou Tong mentioned on Bitcointalk, the analysis linked the 10,000 bitcoins out of the 40,000 bitcoin stolen from bitcoinica, which were supposedly meant to be used to reimburse the users were actually linked back to Zhou Tong’s personal wallet.
The analyst also published a piece of evidence which linked some transactions from the Bitcoinica theft to current Bitcoin Reddit moderator and the founder of Bitcointalk.org, Theymos. According to the, 15,000 bitcoins out of the total 40,000 bitcoins sent from the original wallet of Bitcoinica was made up of additional outlets.
One of the address or outlets of the transactions Zhou Tong used held 2000 bitcoins. Using that address, Tong sent 80 bitcoins to Theymos and the rest himself. The analyst supports his claim that the bitcoins were sent to Theymos because they were spent by the account of Theymos at Bitcointalk.
The analyst concluded his findings saying that Zhou Tong stole a few bitcoins from his own platform. Like this, Bitcoin transactions can be easily traced with recently developed innovative blockchain tools and technologies.