Cryptocurrency exchanges are increasingly freezing user accounts linked to ransomware attacks or that have sent Bitcoin to coin mixers.
Meanwhile Binance Singapore and Paxful are cracking down users who interact with coin mixing services that attempt to thwart efforts to trace Bitcoin.
In the ransomware case, the High Court ordered Bitfinex to hand over its Know Your Customer identifying information for the account.
The blockchain investigators traced $950,000 of Bitcoin (109.25 BTC) back to Bitfinex that had been paid by an insurance company as ransom after attackers encrypted 1000 computers and 20 servers.
You can negotiate ransoms apparently
The attackers originally demanded $1.2 million but the company negotiated the ransom down to $950,000 and received a decryption key enabling it to recover its systems after ten days work.
Some of the Bitcoin was converted into fiat, but the remaining 96 BTC was sent to an Bitfinex.
Bitfinex said in a statement:
“Bitfinex has robust systems in place to allow it to assist law enforcement authorities and litigants in cases such as this.
“We understand the focus of the Claimant’s attention is no longer on the Bitfinex platform. It now appears Bitfinex is an entirely innocent party mixed up in this wrongdoing.”
New Money Review, which broke the story, said the case was also significant as it was the first time the UK High Court had endorsed Bitcoin as property.
Wtf?? Apparently you are not allowed to do what you want with your bitcoin once you own the keys. Fortunately that's not how Bitcoin works, but the level of chain analysis here is alarming. What is a correct response? @MartyBent @matt_odell @vandrewattycpa pic.twitter.com/BhMDThLHGc
— Ronald McHodled (@RonaldMcHodled) January 28, 2020
Exchanges cracking down on coin mixers
Exchanges are also cracking down on efforts to stymie blockchain investigations, with Paxful exchange joining Binance Singapore in restricting transactions involving coin mixing service.
Twitter user Ronald McHodled was outraged at the invasion of privacy and the restriction on mixing services, after being questioned by Paxful over a transaction he sent to a mixer and told it was not permitted.
He said he was using a mixer simply as a privacy measure before placing his Bitcoin in cold storage.
“Wtf?? Apparently you are not allowed to do what you want with your Bitcoin once you own the keys. Fortunately that’s not how Bitcoin works, but the level of chain analysis here is alarming. What is a correct response?”
It mirrors an incident at the end of last year, when Binance Singapore froze an account after the user sent funds to coin mixer Wasabi.
Coin mixing services attempt to obscure the provenance of Bitcoin by pooling Bitcoin and sending random coins back to users.
Exchanges are required to comply with regulations around money laundering and terrorism financing and the new FATF travel rule – which requires them to know the counterparty users send crypto to – is likely to see users unable to transact with coin mixing services directly from exchanges.