How the American Government Surveils the Blockchain
The United States federal government has paid approximately half a million dollars to a private corporation to help various agencies conduct surveillance on the Bitcoin blockchain. The corporation which helps the United States government conduct mass surveillance of Bitcoin transactions is known as Chainalysis. The company has contracts with at least over half a dozen federal agencies. Chainalysis has offices in New York City in the United States, as well as in Copenhagen in Denmark. This blockchain surveillance company, which is being contracted by various agencies of the American federal government, was founded in 2014. Chainalysis is not the only corporation helping law enforcement monitor Bitcoin transactions, as DeepDotWeb has previously reported on a private corporation known as Verint which offers services to local and state police departments, such as when they offered virtual currency monitoring services to the Boston Police Department early last year.
Some of the federal agencies which have contracted with Chainalysis include the Internal Revenue Service (IRS), the Drug Enforcement Administration (DEA), the Federal Bureau of Investigation (FBI), Immigration and Customs Enforcement (ICE), the Department of Homeland Security (DHS), the Department of Treasury’s Bureau of the Fiscal Service, and the Securities and Exchange Commission (SEC). Information obtained from agency procurement records shows that the FBI paid over $330,000 to Chainalysis for products and services between August 2015 and February 2017. The FBI’s latest payment to Chainalysis occurred in February last year, when the bureau paid the blockchain surveillance company approximately $150,000. One division of the FBI which appears to be using software and services from Chainalysis is the FBI’s Criminal Investigative Division. The FBI’s Finance Division has also contracted with Chainalysis. In July 2017, the SEC paid nearly $40,000 to Chainalysis, however options in the contract could make the total paid to the company as high as $200,000.
In December 2017, ICE paid Chainalysis an excess of $13,000. The total amount of money paid by ICE to Chainalysis exceeds $58,000. Meanwhile, the IRS paid Chainalysis over $88,000, part of which went to help investigations involving the darknet. The IRS and ICE have also contracted with another corporation to help monitor the darknet and surveil the blockchain, a company known as Flashpoint. The IRS has paid over $65,000 to Flashpoint, and ICE has paid Flashpoint over $150,000. The IRS has been involved in multiple investigations related to the darknet, and paid Flashpoint for access to their API. The DEA has paid at least $47,000 to Chainalysis. In September 2016, the DEA paid over $13,000 for a one year support subscription. In June 2017 the DEA paid Chainalysis over $7,000, and made another payment to them in mid-October 2017, when the DEA paid nearly $20,000 to Chainalysis. According to procurement records the most recent payment the DEA has made to Chainalysis was nearly $7,500 on December 27th 2017.
Many cases in which the products and services of Chainalysis have remained unknown. However, it is known that the services of Chainalysis were used in prosecuting corrupt former DEA agent Carl Force, when he stole Bitcoin during the investigation in the original Silk Road darknet marketplace. Chainalysis does not only work with law enforcement agencies in the United States, the company also works with law enforcement agencies around the globe. In February 2017, Chainalysis signed a Memorandum of Understanding regarding information sharing with the European Union Agency for Law Enforcement Cooperation, also known as Europol.
Michael Grønager, Director, CEO, and co-founder of Chainalysis told a Danish television station that criminals who use Bitcoin are not much different from regular criminals. “It’s just money that’s being moved around. Of course, someone is a little ahead of the shoes, as they use modern technology like bitcoin,” Grønager told the Danish television station. He believes Bitcoin provides financial transparency in response to the financial crisis. Other corporations aim to provide blockchain surveillance software and services to law enforcement agencies, such as Elliptic. Elliptic, a joint American-British company, was founded in 2013 and has received millions of dollars in funding from Octopus Investments, Santander InnoVentures, KRW Schindler, Digital Currency Group, and Paladin Capital Group. Paladin Capital Group is headed by a former NSA director. In late 2016, Elliptic partnered with LexisNexis Risk Solutions on anti-money laundering activities. People who wish to avoid financial surveillance should consider using privacy-centric cryptocurrencies with opaque blockchains, such as Monero.
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