A joint effort of German, American, and Europol agents have successfully taken down a multibillion online money laundering operation called ChipMixer last Wednesday. The platform allegedly operated mostly on the darknet, dealing in masking cryptocurrency obtained through illegal means.
The ChipMixer Platform
ChipMixer had been active on the darknet since mid-2017 and had allegedly accepted cryptocurrencies, primarily Bitcoin, of criminal origins. The obtained digital assets were then put through a “mixing” process to disguise their sources.
The system offered complete anonymity to its users who paid in crypto, which is then broken down into small amounts known as “chips”. These are later combined with other users’ chips to hide the money’s origin from law enforcement officials and regulators.
The platform is estimated to have laundered about 154,000 Bitcoin, equivalent to 2.8 billion euros. A large slice of that has been confirmed to have come from darknet marketplaces, crypto fraud, ransomware rings, and other criminal acts.
The German Federal Criminal Police Office and Frankfurt prosecutors led the investigation, working in close cooperation with the United States Federal Bureau of Investigation (FBI) and the European Union’s crime agency, Europol. They seized the Germany-based server infrastructure of ChipMixer, securing about 44 million euros ($47 million) worth of Bitcoin and approximately seven terabytes of data during the raid.
According to the latest developments of the case, authorities are currently searching for the chief suspect. The identity of the culprit is yet to be disclosed though.
How the US and the EU are Combating Illegal Crypto Activities
Regulations can play a significant role in preventing such illegal activities from occurring. Right now, major markets are implementing anti-money laundering (AML) and know-your-customer (KYC) standards to ensure that cryptocurrency exchanges and other related businesses are not used to launder money or finance terrorist activities.
The European Union’s fifth Anti-Money Laundering Directive (5AMLD), which came into effect in early 2020, requires cryptocurrency exchanges and wallet providers to conduct KYC checks on their customers. Likewise, it requires them to report suspicious transactions, and register with their local financial authorities.
Similarly, the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of Treasury, requires cryptocurrency businesses to register with the agency, report suspicious activities, and comply with AML regulations. Meanwhile, the Securities and Exchange Commission (SEC) is in charge of regulating crypto assets that are classified as securities under the Howey test.
Some Notable Crypto Raids in the Past Couple of Years
Aside from the ChipMixer takedown, there have been other notable instances of law enforcement agencies in the US and the EU taking down illegal crypto activities. One such case was the shutdown of Bestmixer.io in 2019, which was another crypto-mixing service that operated on the darknet.
Dutch authorities led the investigation, and they collaborated with Europol and Luxembourg police in seizing the platform’s servers. The platform was accused of laundering approximately $200 million worth of Bitcoin for over 10,000 customers.
Another significant case was the bust of the cryptocurrency Ponzi scheme OneCoin. This was taken down by the US Department of Justice in 2019.
The scheme which operated in multiple countries had claimed to have mined its own cryptocurrency, and its leaders had defrauded investors of approximately $4 billion. OneCoin founder Ruja Ignatova is currently on the run as a fugitive due to charges of wire fraud, securities fraud, and money laundering.
Additionally, in 2021, the US Department of Justice seized approximately $2.3 million worth of cryptocurrency that had been paid as ransom in the Colonial Pipeline cyberattack. The attack had caused widespread panic and fuel shortages on the US East Coast, and the seizure of the ransom payment was seen as a significant victory in combating ransomware attacks.
The takedown of the ChipMixer money laundering platform serves as an important reminder of the potential dangers of unregulated cryptocurrency markets. Thus, international cooperation between law enforcement agencies and the strict implementation of AML and KYC regulations are critical in ensuring that cryptocurrencies are not used for criminal or terrorist activities.