Last week, four men were arrested in the Netherlands for spreading a type of malware that allowed them to obtain Dutch bank account information. And they used a bitcoin exchange to launder some of $1.4 million that was stolen from approximately 150 bank accounts.
The malware, known as TorRAT, targeted only Dutch speakers. TorRAT used the anonymizing network Tor to use its command and control (C&C) servers. The men also paid for a Turkish crypting service to circumvent antivirus software and utilized the hosted tormail.org in order to communicate.
Once the malicious software was able to obtain financial information from its victims, the four suspects would then steal money from the bank accounts. They then used a bitcoin exchange that they set up called FBTC Exchange in order to launder some of the stolen cash into euros.
The police reportedly seized 56 bitcoins from the men, and they were able to exchange them for more than €7,700, or $10,000.
And much like Tor enabled the accused Dutch thieves, Silk Road also relied on the anonymous network in order to hide its users' identities and enable illegal activity. The FBI has reportedly seized hundreds of thousands of bitcoins from bitcoin wallets owned by Ulbricht, a 29-year-old graduate student who was operating Silk Road from a residence in San Francisco.
It was ultimately the reliance on third parties that likely got the TorRAT suspects arrested, according to Trend Micro.
"Buying a service from a crypting service, using tormail.org, and recruiting and abusing money mules puts cybercriminals at risk of getting caught. A single error can lead to the unraveling of the whole cybercrime operation. Tor offers a high degree of anonymity, but Tor tools are not immune to data leaks," says the Trend Micro post on the subject of TorRAT.
And although bitcoin exchanges being used as a tool for criminal activity is not good, government intervention will not help, according to Tuur Demeester who is a bitcoin expert and investor.
"It's an illusion to believe that 'a war on fraud' in the exchange sector will make the problem go away," he said.
"I think making the cost-benefit analysis, educating bitcoin users about the importance of security and the dangers of fraud will go a much longer way than creating ever more bureaucratic hoops for legitimate entrepreneurs to jump through."
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.