Yesterday, German and US authorities, with the support of Europol (the European Union Agency for Law Enforcement Cooperation) and national authorities from Belgium, Poland, and Switzerland, shut down the infrastructure of the popular cryptocurrency mixing platform ChipMixer. According to the official message published by Europol, ChipMixer was involved in money laundering.
Read also: $100 million drained from Horizon bridge on Harmony
Authorities seized about 1909.4 bitcoins worth almost 48 million at press time, four servers, and 7 TB of data, while US law enforcement arrested Minh Quốc Nguyễn, who was involved in an identity theft and money transfer business related to ChipMixer.
Although ChipMixer is an unlicensed platform, it has been operating globally since 2017. As per the official statement published on the website of the US Department of Justice, ChipMixer has processed stolen funds worth over $700 million since its inception, including funds coming from the customers of the largest darknet market Hydra Market as well as the assets stolen by North Korean hackers from Axie Infinity's Ronin Bridge and Harmony's Horizon Bridge. Over $35 million in Bitcoin has also been processed for fraudulent transactions associated with stolen data, credentials, and credit cards.
"The ChipMixer software blocked the blockchain trail of the funds, making it attractive for cybercriminals looking to launder illegal proceeds from criminal activities such as drug trafficking, weapons trafficking, ransomware attacks, and payment card fraud. Deposited funds would be turned into “chips” (small tokens with equivalent value), which were then mixed together - thereby anonymizing all trails to where the initial funds originated," Europol's message explained the way ChipMixer cut Bitcoin's trail.
The ability of Bitcoin mixers to obfuscate transactions raises the question whether such platforms are legal in the first place. Undoubtedly, using crypto-mixers to launder money is a criminal offense, and recently several people associated with such services have been prosecuted, including the 2021 arrests of Larry Harmon, the owner of the Helix platform owner and Roman Sterlingov, the founder of Bitcoin Fog.
Read also: Ronin bridge exploiter starts withdrawing their loot
The regulations for Bitcoin mixers depend on the jurisdiction, although they may appear somewhat ambiguous. For example, after Harmon's arrest, Criminal Division Assistant Attorney General Brian A. Benczkowski said in an official U.S. Department of Justice release, "Helix allegedly laundered hundreds of millions of dollars of illicit narcotics proceeds and other criminal profits for Darknet users around the globe. This indictment underscores that seeking to obscure virtual currency transactions in this way is a crime and that the Department can and will ensure that such crime doesn’t pay."
This statement was quoted out of context by many news platforms, which implied that Bitcoin mixers are generally considered illegal by US authorities, while Benczkowski spoke specifically of the use of such services to conceal criminal profits.