If the prosecution doesn’t produce clear proof as Sterlingov’s case unfolds, it could must depend on the extra oblique digital connections between Sterlingov and Bitcoin Fog that it describes within the assertion of details assembled by the IRS’s prison investigations division, a lot of which was based mostly on cryptocurrency tracing methods. That assertion reveals a path of economic transactions from 2011 allegedly linking Sterlingov to funds made to register the Bitcoinfog.com area, which was not Bitcoin Fog’s precise dark-web website however a standard web site that marketed it.
The funds to pay for that area traveled via a number of accounts and have been ultimately exchanged from Bitcoin for the now-defunct digital foreign money Liberty Reserve, in response to prosecutors. But the IRS says IP addresses, blockchain information, and telephone numbers linked with the varied accounts all join the funds to Sterlingov. A Russian-language doc in Sterlingov’s Google Account additionally described a way for obfuscating funds just like the one he’s accused of utilizing for that area registration.
Sterlingov says he “can’t remember” if he created Bitcoinfog.com and factors out that he labored on the time as an online designer for a Swedish advertising firm, Capo Marknadskommunikation. “That was 11 years ago,” Sterlingov says. “It’s really hard for me to say anything specific.”
Even if the government can prove that Sterlingov created a website to promote Bitcoinfog.com in 2011, however—and Ekeland argues even that is based on faulty IP address connections that came from Stertlingov’s use of a VPN—Ekeland points out that’s very different from running the Bitcoin Fog dark-web service for the subsequent decade it remained online and laundered criminal proceeds.
To show Sterlingov’s deeper connection to Bitcoin Fog beyond a domain registration, the IRS says it used blockchain analysis to trace Bitcoin payments Sterlingov allegedly made as “test transactions” to the service in 2011 earlier than it was publicly launched. Investigators additionally say that Sterlingov continued to obtain income from Bitcoin Fog till 2019, additionally based mostly on their observations of cryptocurrency funds recorded on the Bitcoin blockchain.
Ekeland counters that the protection hasn’t acquired any particulars of that blockchain evaluation and factors out that it was neglected of the newest superseding indictment in opposition to Sterlingov, which was filed final week. That means, he argues, that the federal government has based mostly the core of its case on an unproven, comparatively new type of forensics—one which he says led them to the incorrect suspect. “Has it been peer-reviewed? No,” Ekeland says of blockchain evaluation. “Is it generally accepted in the scientific community? No. Does it have a known error rate? No. It’s unverifiable. They can say total nonsense, and everyone has to take it on faith.”
Ekeland says that discovery documents in the case show that the prosecution’s cryptocurrency tracing was performed with tools sold by Chainalysis, a New York–based blockchain analysis startup, along with consulting help from Excygent, a government contractor specializing in cybercriminal and cryptocurrency investigations, which Chainalysis acquired in 2021.
Ekeland argues that Chainalysis, valued at $8.6 billion in a recent investment round and frequently used in high-profile cybercriminal law enforcement investigations, had a conflict of interest in the case, given its financial dependence on US government contracts and a flow of former government investigators who have gone to work for Chainalysis. “This is a story of people profiteering and advancing their careers, throwing people in jail to promote their blockchain analysis tool that is junk science and doesn’t withstand any scrutiny,” says Ekeland. He provides that, based mostly on the proof supplied in Sterlingov’s case, he believes “Chainalysis is the Theranos of blockchain evaluation.”