CyberCrime & Doing Time: Book Review: Cryptocurrency Launderers: Crime and Cryptocurrencies


I wish there was a way to review this book without first reading last year’s “Tracers in the Dark.” While Tracers was about the people involved in investigating various crypto crimes and the early researchers who made the tracing process possible, Carlisle tells many of the same stories, but in a less engaging way. The facts are there, and when they talk about the same cases, they agree well. But Andy Greenberg’s Tracers tells these people stories, while Carlisle describes facts without character development that I wouldn’t have realized were necessary or useful in a book about money laundering if I hadn’t not read Tracers beforehand.

As for the facts? I learned a lot, including nurturing my ADD nature by searching for interesting footnotes — over 350 references are provided! THANKS!!! In the first part of the book, he covers all the obligatory cases: the Silk Road, Mount Gox, etc.

Where this book is great, and it is far superior to Tracers as an educational resource in this regard, is how money laundering works in Crypto. Mixers and Coinswaps are well explained, with several related cases such as Helix and Bitcoin Fog. The importance of regulation and how regulators have kept up with crypto developments is a major theme of the book. From regulating exchanges to Bitcoin ATMs, to privacy wallets like Wasabi Wallet, and the debate over whether privacy wallets can or should be regulated. Of particular interest are FinCEN’s attempts to introduce new regulations and Astroturf’s (in my opinion) outcry against them.

An example of what I consider to be a very rational and necessary AML policy would be FinCEN’s draft proposed rulemaking, submitted on Dev 18, 2020 for “requirements for certain transactions involving convertible virtual currencies or digital assets” tried to require transactions over $3,000 to require proof of the recipient’s identity if sent to a private wallet, and would have required a currency transaction report for any movement over $10,000. The backlash was violent and rulemaking was suspended.

Also featured is some nice coverage of OFAC’s crypto sanctions history, from Suex, Chatex, Garantex, Bitzlato, and IRGC-related ransomware. And a story of the evolution of ransomware, which wouldn’t be possible without these unidentified and unaccounted large currency transactions that cryptocurrency has enabled (and which FinCEN tried to prevent!)

An example of a crypto sanction is the OFAC Sanctions Against Lazarus Group’s Ethereum Addresses, sanctioned with one of their chosen blenders, (Sanctioned addresses are listed here.) I appreciated some of the additional details Carlisle provided on Lazarus Group money launderers Tian Yinyin and Li Jaidong (snowjohn and khaleesi), who moved at least $100 million, including the purchase of ‘at least $1.4 million in Apple iTunes gift cards! (But again, no “characters”, just names.)

The last part of the book explains very well how Ethereum opened up a number of possibilities with smart contracts. Carlisle does a great job explaining Ethereum and ERC-20 tokens and how DAOs, DEXs and DApps are built using Ethereum’s smart contracts with more information on the DeFi system including how bridges work . He also explains NFTs and how they too have been supercharged by ERC-721 (and abused by thieves, fraudsters, insiders and money launderers.) It was the best introduction to this whole ecosystem that I have read. Well done!

The book-opening Bitfinex hack focused on 94,643.29 BTC from 2016, under the microscope, untouched for six years, until it was moved to February 2022, leading to the arrest of Dutch and Razzlekhan with $3.5 billion seized makes it look like it was set up. as the climax of the book as we returned to the story from the opening chapter. The middle chapters helped us understand the mechanics now revealed, but again, it was facts without characters, which is fine – I was just ruined by the Tracers’ involvement.

The final chapter seems to be something that Elliptic’s marketing department forced upon him. (The other major players in the crypto industry all do the same thing, so don’t choose Elliptic. It was the first crypto tracing tool I ever used!) The mandatory industry toes the line of “oh, but less than 1% of crypto transactions are illicit!” was a frustrating ending to an otherwise decent book. No one will ever convince me that the vast majority of crypto transactions don’t involve any “transactions”, but are transactions washing machines on an inconceivable scale, designed to manipulate the value of cryptocurrencies in order to encourage investment and enrich HODLers and businesses whose livelihood is crypto.

Fantastic content – possibly even as a companion text for a crypto-crime course at a university (yes, my wheels are turning!), especially with the wealth of articles, policies and cases referenced. But for a fun crypto crime STORY, I would still go with “Tracers In the Dark”.

Leave a comment