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Bitcoin

Feds track Bitcoin to break up child porn ring

The huge child pornography ring was among the first to use Bitcoin to fund its illicit operation, the U.S. Attorney said; more than one million bitcoin addresses found

Federal prosecutors said that they successfully back-traced Bitcoin transactions to break up a major child pornography ring.

The Welcome To Video website was the largest child sexual exploitation market by volume of content ever discovered, according to a release issued on October 15 by Jesse Liu, the U.S. Attorney for the District of Columbia.

The site was hosted in South Korea by 23-year-old Jong Woo Son, and contained 250,000 unique videos—eight terabytes—nearly half of them unknown to law enforcement, according to a press release issued by Liu.  Son has been jailed in South Korea.

It was also one of the first Darknet websites of its kind to “monetize child exploitation videos using bitcoin,” Liu’s office said. “Each user received a unique bitcoin address when the user created an account on the website. An analysis of the server revealed that the website had more than one million bitcoin addresses, signifying that the website had capacity for at least one million users.”

This filing claims that “law enforcement was able to trace payments of bitcoin to the Darknet site by following the flow of funds on the blockchain.”

That could become more common, as law enforcement agencies are improving their crypto tracing abilities, according to John Jefferies, chief financial analyst at blockchain forensic firm CipherTrace.

“They are getting smarter about cryptocurrency evidence identification and collection,” Jefferies said to Modern Consensus. “They are training officers and agents. They are more widely deploying advanced tracing tools… to follow the money through dark markets effectively.”

Liu’s office added, “[t]he virtual currency accounts identified in the complaint were allegedly used by 24 individuals in five countries to fund the website and promote the exploitation of children.”

Agents of the Internal Revenue Service’s Criminal Investigation division relied on Bitcoin tracking to find the Welcome To Video host server and break up the ring, said Don Fort, the IRS-CI’s chief.

“Through the sophisticated tracing of bitcoin transactions, IRS-CI special agents were able to determine the location of the Darknet server, identify the administrator of the website and ultimately track down the website server’s physical location in South Korea,” Fort claimed. “Regardless of the illicit scheme, and whether the proceeds are virtual or tangible, we will continue to work with our federal and international partners to track down these disgusting organizations and bring them to justice.”

The U.S. Attorney said that beyond the arrest of 337 site users from the U.S. and 11 other countries, 23 children were rescued in the U.S., Spain, and the United Kingdom.

The site boasted of more than one million videos sold, the release noted, adding that these sites are typically a peer-to-peer forum allowing users to trade these videos among themselves.

“Sadly, advances in technology have enabled child predators to hide behind the dark web and cryptocurrency to further their criminal activity,” said Alysa Erichs, acting executive associate director of U.S. Immigration and Customs Enforcement (ICE)’s Homeland Security Investigations

“Today’s indictment sends a strong message to criminals that no matter how sophisticated the technology or how widespread the network, child exploitation will not be tolerated in the United States,” Erichs added. Our entire justice system will stop at nothing to prevent these heinous crimes, safeguard our children, and bring justice to all.”

Liu’s office is also seeking forfeiture of the Bitcoin recovered, which will be turned over to victims found on the videos.

“Children around the world are safer because of the actions taken by U.S. and foreign law enforcement to prosecute this case and recover funds for victims,” said Liu.  “We will continue to pursue such criminals on and off the darknet in the United States and abroad, to ensure they receive the punishment their terrible crimes deserve.”

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson owns no cryptocurrencies.

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