Demand for Crypto Mixers Hits ATH, Illicit Address Activities Draws Majority

The rising use of mixers in the crypto space draws public attention. Criminals and their illicit activities are being accused of involving in this situation, according to Chainalysis. 

The blockchain analytic firm stated:

“Nearly 10% of all funds sent from illicit addresses are sent to mixers — no other service type cracked a 0.3% mixer sending share.” 

Source: Chainalysis

Since mixers render enhanced privacy in crypto transactions, cybercriminals, such as hackers can abuse them when obfuscating the source of funds.

A study researched by Chainalysis pointed out that the demand for mixers hit an all-time high in 2022 based on their aspect of creating a disconnection between the crypto funds deposited and those withdrawn. Therefore, this makes the traceability of the flow of funds difficult because they are pooled together and mixed randomly.

The analytic firm pointed out:

“While value received by mixers fluctuates significantly day-to-day, the 30-day moving average reached an all-time high of $51.8 million worth of cryptocurrency on April 19, 2022, roughly doubling incoming volumes at the same point in 2021.”

Source: Chainalysis

The types of mixers include centralized, CoinJoin (with built-in capabilities), and smart contracts that are legitimately used to boost financial privacy. 

Therefore, mixer usage has remained close to historic highs in 2022 based on soaring demand from DeFi protocols, centralized exchanges, and addresses linked to illicit activities such as scams, ransomware, the darknet market, and terrorism financing.

Source: Chainalysis

Chainalysis explained:

“The increase in illicit cryptocurrency moving to mixers is more interesting, though. Illicit addresses account for 23% of funds sent to mixers so far in 2022, up from 12% in 2021.”

Source: Chainalysis

In 2020, the Financial Crimes Enforcement Network (FinCEN) charged a Bitcoin-mixing operator with a $60 million civil money penalty for violating anti-money laundering regulations.

Larry Dean Harmon was arrested and charged with providing unregistered money services to businesses from 2014 to 2020. He laundered over $300 million in Bitcoin and enabled the trafficking of drugs, guns, and child pornography.

Image source: Shutterstock


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Darknet Bitcoin Mixer Operator Bust, Judge Says Bitcoin Is Money

The defendant faces 20 years in prison, had previously argued he was not guilty because bitcoin is not money for U.S. law, but the judge rejected it.

On August 18, an Ohio resident pleaded guilty to money laundering conspiracy charges arising from the operation of a Darknet bitcoin mixing service between 2014 and 2017, as the case’s judge recognized bitcoin to be a store of value and a medium of exchange. The court is yet to determine Larry Dean Harmon’s sentence, but he faces a maximum penalty of 20 years in prison and a hefty fine. Harmon also agreed to forfeit 4,400 BTC, currently valued at over $200 million.

On previous hearings, Harmon tried to make the case that since bitcoin is not money per D.C. law, he couldn’t be found guilty of the money laundering charges. However, Chief U.S. District Judge Beryl A. Howell rejected his reasoning, saying that bitcoin does perform the function of money.

“Money,” Howell wrote, “commonly means a medium of exchange, method of payment, or store of value. Bitcoin is these things.”

The U.S. Department of Justice (DoJ) released a statement detailing Harmon’s confession that he operated Helix, the bitcoin tumbler, for three years. Custodial bitcoin tumblers work by mixing coins (UTXOs) from different sources. The service accepts your funds with the promise that it will return them after some time. The exact amount of funds is returned but with different coins to try and obfuscate the origin and owner of each coin in exchange for a fee. Harmon advertised Helix to customers on the Darknet to conceal transactions from law enforcement, the statement said.

“Harmon admitted that he conspired with Darknet vendors to launder bitcoin generated through drug trafficking and other illegal activities,” said Assistant Director in Charge Steven M. D’Antuono of the FBI’s Washington Field Office.

Helix is said to have partnered with AlphaBay, Evolution, and Cloud 9, among other Darknet markets. In total, it is estimated that Helix moved over 350,000 bitcoin on behalf of customers, valued at over $300 million when transactions were made.

Custodial services are generally a bad idea, regardless of their nature. However, good faith-acting Bitcoiners that value privacy have better options to ensure their sovereignty, especially for spending their money. Non-custodial CoinJoins, for instance, have the power to break many heuristics used by chain analysis entities to identify the source and ownership of funds. Moreover, the user can retain control of the funds through CoinJoin, and the practice is entirely legal since it is ultimately just a Bitcoin transaction.


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