FBI Using Bitcoin Mixers With Victims’ Assets

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  • The FBI has been accused of using Bitcoin mixers when recovering stolen assets
  • Bitcoin mixers aren’t actually illegal, although the DoJ has called them “a crime”
  • Victims cannot be sure of just how much of their bitcoin was really recovered

The FBI has been accused of using the same Bitcoin mixing services that the Department of Justice (DoJ) has previously labeled “a crime”. Crypto education publication Coinmonks has identified at least one instance of a time where the FBI ran recovered bitcoin through a Bitcoin mixer, obfuscating the true recovered amount and raising questions of the morality of the action, especially in the wake of the Silk Road case.

Blockchain Trail Suggest FBI Using Bitcoin Mixers

Coinmonks says that the FBI “routinely uses Bitcoin mixers both before and after a seizure” in violation of the opinion of the Department of Justice, who in February last year classed it as “a crime” when it arrested the operator of a Bitcoin mixer service. Coinmonks points to a case involving a Tuscon, Arizona man, Ahmad Wagaafe Hared, in which 39.67 worth some $307,000 was seized in August 2018. However, the sum seized was later claimed to be $255,731.58, meaning that 16.7% had gone missing along the way.

It was initially thought that the FBI’s typical 15% cut on any sale of digital assets was to blame for this reduction, but FBI paperwork revealed discrepancies with dates and addresses that showed otherwise – the FBI had taken possession of the bitcoin in January 2018, seven months earlier than they had initially said, and had arrived with the FBI from an address that had sent more than 43 million bitcoin over 800,000 transactions.

Silk Road Wounds Leave Scars

Clearly something was up, and the victims were understandably not happy with potentially losing out on more money, this time through the hands of the authorities that were supposed to be getting it back for them. Coinmonks discovered that the FBI was almost certainly sending the bitcoin through a mixer on its way to their wallets, a practice that prevented the true recovered amount from being known. Bitcoin mixers were already under suspicion, but that suspicion was formalized when Bitcoin mixing service operator Larry Dean Harmon was arrested in February 2020 and fined $60 million.

The issue of trust regarding the FBI’s actions around recovered bitcoin might not be so bad if it wasn’t for the two Silk Road investigators, Carl Force and Shaun Bridges, who laundered thousands of bitcoin from the website’s wallets for their own personal gain. Following these high profile cases, it’s no wonder victims of crypto crime are wary when it comes to the FBI and their bitcoin especially if the authorities are using bitcoin mixers to hide the true recovered funds.