tracking tool Over the past few years, cryptocurrencies have allowed law enforcement agencies to convict darknet black market administrators, recover millions in ransomware payments, seize billions of stolen bitcoins, and even disrupt child abuse networks. Now, a criminal defendant claims the same tool also unjustly jailed him for more than 15 months.
Last spring, 33-year-old Swedish-Russian Roman Sterlingov was arrested by IRS criminal investigators at the Los Angeles airport and charged with creating and operating Bitcoin Fog, a way to “mix” bitcoin in the dark service. The network collects coins from its users and returns them to others, with the aim of preventing forensic accountants from tracking the funds. The Justice Department charged Sterlingov with laundering no less than $336 million over a decade of Bitcoin Fog’s online money laundering operation.
Now, Sterlingov’s legal team, led by prominent hacker defense attorney Tor Ekeland, has fought back: In a series of legal motions filed late yesterday, they claimed Sterlingov’s innocence and vowed to bring his case to trial. In doing so, Sterlingov’s defense said, it was necessary to prove not only that he never ran Bitcoin Fog, but also that the blockchain analysis techniques used to attribute the case to him were wrong, leading to his wrongful arrest and loss of his life. one year.
“I didn’t create Bitcoin Fog. I was never the administrator of Bitcoin Fog,” Sterlingoff told Wired at the Northern Virginia prison. “I’ve been here for over a year. I’m really confused about the systems that can put me here, what they can do to an innocent person. It’s a Kafkaesque nightmare.”
Unlike some of the more explicit investigations into the criminal use of cryptocurrencies, prosecutors in Sterlingov’s case did not point to any hard digital evidence retrieved from Sterlingov’s property or equipment when he was arrested during a trip to the United States last year. Instead, a statement of fact released when the allegations against Sterlingov became public in April 2021 detailed a combination of blockchain-based cryptocurrency tracking, IP address matching and linking of online account information. The IRS said the collection of evidence linked Sterlingov to the creation of Bitcoin Fog in 2011 and showed that — particularly through Bitcoin tracking — he continued to earn profits from the service into 2019.
“What about the hard evidence?” asked Ekland, Stringoff’s defense attorney. He reviewed a list of items found on Sterlingov at the time of his arrest, which he said included a laptop, a hard drive, backup codes for his accounts, a bitcoin debit card and a custom-made smartphone used to store cryptocurrency. “But you know what they found when they caught him traveling? A little evidence that he was running Bitcoin Fog. No witnesses, no logs, no communications. They fixed it on a multi-layer guessing game.”
The Justice Department has not responded to WIRED’s request for comment. The IRS declined to comment on the pending lawsuit.
Stringoff and his lawyers yesterday filed a motion to dismiss, a Detail Bill motion, a motion to release seized assets and a motion to reconsider pretrial detention, among others. During the discovery process, the Department of Justice has generated more than 3 terabytes of case-related data. The defense argues that the sheer volume of information is difficult to parse, but nothing in it appears to establish a direct link between Sterlingov and the creation or operation of Bitcoin Fog. They further argued that the digital forensic analysis shared by the prosecution was flawed and opaque at best.