Report: Justice Department Ran Bitcoin-Laundering Sting to Catch Drug Dealers

Illustration of cybercrime (Photo credit should read "HELMUT FOHRINGER/APA-PictureDesk via AFP") Helmut Fohringer / APA-PictureDesk / APA

The Department of Justice ran an undercover Bitcoin-laundering sting to catch drug dealers, according to a report from the Verge.

According to new reports, the Department of Justice ran a Bitcoin-laundering scheme to catch “dark net” drug dealers. By offering cash for Bitcoin, Homeland Security Investigations officials were able to identify specific drug dealers. The scheme has resulted in the arrest of 35 dark web sellers.

According to information provided in a press conference, the Homeland Security Investigations department targeted large-quantity drug distributors on dark web marketplaces. By offering cash for Bitcoin, investigators were able to trace specific coins back to certain dealers, piecing together their elaborate illegal businesses.

HSI Special Agent in Charge Angel Melendez explained the scheme in a press conference this week. “For the past year, undercover agents have been providing money-laundering services to these dark net vendors, specifically those involved in narcotics trafficking,” said Melendez said.

“When we take down a dark net marketplace, these criminals will move to other marketplaces,” Melendez added. “So the focus of this operation was really the bad actors, the people utilizing the dark net to sell drugs.”

Agents from the scheme revealed that they investigated several major “dark web” marketplaces, including the Silk Road, Silk Road 2.0, and AlphaBay. Each of these markets has been entirely shut down. Others, such as DreamMarket, remain online.  Investigators have quickly learned that shutting down marketplaces doesn’t prevent the distribution of illicit drugs. New marketplaces pop up as quickly as others are shut down. Because of this, Melendez explained that the government’s focus has shifted from the illegal marketplaces to individual dealers, who continue to distribute drugs even after marketplaces are shut down by the government.

Melendez also noted that the transparent nature of the blockchain made it easier for his team to track transaction back to distributors. “The biggest selling point for the blockchain is that it’s transparent. Everybody can see it. And we can see it, too,” Melendez said.


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