Every now and then, cryptocurrencies become a target of extreme criticism due to some incident. This time, hindering the progress of cryptocurrencies, an incident took place in the New Jersey state in which Cyrus R. Vance, Manhattan district attorney, indicted a group of three for laundering millions of dollars with bitcoin and selling counterfeit drugs.
Vance, along with the U.S. Postal Inspection Service (USPIS), the United States Secret Service and U.S. Homeland Security Investigations (HSI), revealed the details of the illegal practices by the group members in a press release. They alleged the members of the group, Chester Anderson, Jarrette Codd and Ronald Maccarty, to launder about $2.3 million in bitcoin and selling controlled substances and counterfeit medicines on the dark web. It was revealed that the alleged criminals operated in almost 43 U.S. states.
During the investigation, criminals’ properties and vehicles in New Jersey state were seized. Surprisingly, the seizure turned out to be the biggest pill seizure in the entire history of New Jersey. Investigators found 420,000 to 620,000 alprazolam tablets, about 500 glassines of fentanyl-laced heroin and several other drugs including methamphetamine, ketamine and gamma hydroxybutyric acid (GHB). Furthermore, four pill presses and two industrial mixers used to manufacture drugs were recovered as well. In addition to this, the investigating team also confiscated cryptocurrency from the properties.
Vance explained that talented investigators initiated inspection after noticing suspicious activities at ATMs located in New Jersey and New York. To dig deeper, investigators themselves went undercover and purchased alprazolam tablets, ketamine and GHB from defendant’s dark web storefront, ‘sinmed’. They even tracked more than 1,000 packages sent from defendant’s New Jersey location to different areas of the U.S. These packages portrayed defendant’s address as a Manhattan business.
Later, Vance unveiled that defendants laundered money by accepting cryptocurrency payments which were later used to load pre-paid debit cards. Furthermore, when defendants withdrew more than $1 million from ATMs with debit cards, the authorities got suspicious. The storefront on the dark web also made use of cryptocurrencies for illicit practices and caught the attention of the authorities.
It’s not a first for bitcoin and dark web to be illicitly connected as previously many people had tried the combination to pursue their unlawful goals. Consequently, bitcoin and other cryptocurrencies have to face frequent criticism. Their truly decentralized nature becomes undesirable and subject to several questions. Not long ago, Bill Gates, founder of Microsoft, expressed his thoughts that opposed prospects offered by cryptocurrencies:
Right now cryptocurrencies are used for buying fentanyl and other drugs so it is a rare technology that has caused deaths in a fairly direct way.
Similarly, Governor of the Bank of France, François Villeroy de Galhau, has disapproved cryptocurrencies in the past. He also bashed the decentralized nature of bitcoin, claiming it to be a speculative asset. He quoted:
Bitcoin is in no way a currency, or even a cryptocurrency. It is a speculative asset. Its value and extreme volatility have no economic basis, and they are nobody’s responsibility.
Although there is no denial for bitcoin providing an easy alternative route to the wrongdoers, most people prefer the benefits of bitcoin over fiat. Until and unless transactions are made through banks, no one can possibly trace the entire course of fiat. On the other hand, bitcoin transactions take place on a blockchain where they are inherently traceable, public and permanent. As bitcoin payments are done through a bitcoin wallet, an entire money trail of all past activities can be generated with the help of bitcoin wallet only. One can check the transaction amount and even the address to which it was sent and when it was sent.
The only thing that hinders exact pinpointing of bad actors is the lack of crypto regulation. Despite being able to trace payments, the true identity of a person can’t be traced as bitcoin wallets only reveal pseudonyms of users. However, if the regulatory framework for cryptocurrency and blockchain are put in place and exchanges are urged to maintain complete data of users against their pseudonyms, the actual user behind a bitcoin wallet can be identified. This way anyone indulging in money laundering or other unlawful activity can be effectively dealt with.
Whether it’s the crypto market or law enforcement, bitcoin has managed to stay in the headlines one way or the other. Bitcoin’s supporters have been battling with its misuse but the situation is not thoroughly scrutinized. The role of governments and regulatory bodies is very important in determining the future of bitcoin. France, for example, has laid down some ground rules for the use of cryptocurrencies and has urged other European nations to follow in its footsteps. France could very well become a test bed to determine how exactly regulations impact illegal practices of bad actors.