Monero ransom
Cryptocurrencies,  Technology

Tale of $10M Monero ransom unravels as husband arrested for murder

Now detectives think the Norwegian millionaire killed his elderly wife and demanded the untraceable crypto as a ruse. And the question of whether criminals are embracing privacy coins over Bitcoin got a little more murky

Police investigating the disappearance of a woman in Norway have arrested her husband on suspicion of murder—and believe that the $10 million ransom in a privacy-focused cryptocurrency being demanded for her safe return was part of a “clear, planned deception.”

Anne-Elisabeth Hagen was 68 years old when she went missing in October 2018, appalling a country with one of the lowest rates of kidnappings and killings in the world.

Her husband claimed he had been ordered to pay a ransom of $10 million in Monero, a privacy coin that obfuscates the amount, destination, and source of transactions when they are recorded on the blockchain.

However, on April 28 police revealed they believe no abduction took place, and a negotiation for Anne-Elisabeth’s release was never possible. Kidnapping with a financial motive was still the police’s main theory when the case was made public in January 2019, but by June, detectives believed it was more likely she had been killed.

John Jefferies, the chief financial analyst for blockchain intelligence firm CipherTrace, described the ransom demand as an “unrealistic request”—telling Modern Consensus via email that this represented fully 10% of Monero’s daily traded volume at the time.

But, the move to a privacy coin would be an unwelcome turn at a time when police have begun to have success tracing Bitcoin back to criminals. Another leading blockchain intelligence firm, Chainalysis, has worked with law enforcement on a number of these cases, including the high-profile, October shutdown of Welcome to Video, the largest child abuse site ever discovered.

Suspicions turn

As the police’s enquiries took a turn, attention began to shift to Anne-Elisabeth’s husband, Tom Hagen. One of Norway’s richest men after making his fortune in electricity and property companies, business publications in the country have estimated that he has a net worth of $200 million.

In a statement, Norwegian police said: “After 18 months of extensive investigation, the police have now come to the point where we believe there is reasonable reason to suspect Tom Hagen of murder or complicity in the murder of Anne-Elisabeth Hagen.

“It is important to emphasize that even though we have a charge, the case is still under investigation and there are several unanswered questions that the police will continue to work on,” they added. “It will be particularly important to clarify Tom Hagen’s role in the case, to find Anne-Elisabeth Hagen, and to clarify if there are more people involved.”

According to Reuters, Inspector Tommy Broeske told a news conference that the purported ransom may have been designed to sidetrack investigators.

Back in 2019, the lawyer who was representing the Hagen family had said they had not received proof that Anne-Elisabeth was still alive—and although he claimed contact had been made with the purported kidnappers online, little detail was provided about the platform used for communication.

Police had initially instructed Hagen to keep the case under wraps because of concerns that Anne-Elisabeth could come to harm if her abduction was made public.

Tom Hagen is being remanded in custody for four weeks, and is banned from receiving letters or having any visitors. According to local media reports, he was arrested as he made his way to work on Tuesday morning—and Hagen’s lawyer says his client “strongly maintains that he had nothing to do with this.”

A growing trend

Even though police suspect the Monero ransom in this case was a fabrication, there is evidence to suggest that digital currencies—generally Bitcoin—are increasingly being used for blackmail and extortion. Although many of these cases target businesses, there have sadly been cases where people’s lives have been put at risk.

As reported by the Financial Times, an executive of a cryptocurrency exchange was kidnapped in the Ukrainian capital Kiev on December 27, only to be released when he paid a ransom of $1 million in Bitcoin.

A YouTube star was recently sentenced to 50 years behind bars in Mexico for his role in the abduction of a 33-year-old lawyer. The gang Germán Abraham Loera Acosta was involved in had demanded Bitcoin worth $103,000 for her release, a ransom that was paid. But prosecutors noted that, despite Loera Acosta’s savviness when using the internet, the Bitcoin transaction was “traceable at the end of the day.”

FBI Director Christopher Wray said much the same thing to Congress in November. When asked, he declined to call for legislation focused on making cryptocurrencies trackable, pointing instead to the “tools that we have to follow the money even in this new world that we’re living in.”

Indeed, crypto privacy advocates are at some pains to point out that Bitcoin is pseudonymous rather than truly anonymous—every transaction is right there on the ledger for everyone to see.

Why Bitcoin?

It’s somewhat surprising that Monero (XMR) hasn’t gained more traction among the world’s hackers, kidnappers, and extortionists. Even though Monero has been around since 2014, many ransomware groups have been slow to adopt it.

Just this month, Bleeping Computer reported that the Sodinokibi group had begun favoring XMR over BTC because of its untraceability—so much so that the ransom increases by 10% if Bitcoin is chosen as a payment method.

In a rather extraordinary admission—not least because it seems it would encourage malicious actors to start using Monero—the European law enforcement agency Europol recently admitted that it found XMR payments impossible to track.

But according to the crypto intelligence firm Chainalysis, there’s a very good reason why Monero isn’t a criminal’s go-to digital asset.

A spokeswoman told Modern Consensus via email: “Bitcoin is still the dominant cryptocurrency used in crime; we attribute this to its liquidity.

“While privacy coins are more difficult to trace, they are also more difficult to buy and sell as exchanges increasingly delist them due to regulatory reasons. As such, criminals behind darknet markets, extortion schemes, and more need to weigh operational efficiency vs privacy, and often choose operational efficiency.”

CipherTrace’s John Jefferies echoed these remarks, saying: “Bitcoin remains the most common cryptocurrency used by criminals because of its ubiquity and ease of ‘cashing out’ for fiat currency at exchanges lacking proper know your customer and anti-money laundering measures. About 63% of top exchanges either have no KYC or poor KYC with little verification.”

He noted that Bitcoin’s daily trading volumes exceed those of Monero by a factor of 300, but warned darknet markets are increasingly beginning to accept these privacy coins, with 32% of exchanges allowing XMR to be sent and received with ease.

Monero’s status as a fully private cryptocurrency is far from assured, however. Jefferies added: “It’s a myth that privacy coins cannot be traced at all, though they do have higher privacy than pseudonymous Bitcoin.”

Monero, he said by way of example, “has a thing called view keys—a built-in mechanism to allow approved viewers to see certain info about a transaction.”

The privacy dilemma

Estimates from blockchain intelligence firms repeatedly suggest that the percentage of Bitcoin transaction volumes devoted to darknet markets and child exploitation sites is exceedingly low when compared with overall activity. Whereas a $20 bill can be passed from one person to another without scrutiny, this is looking less and less possible with Bitcoin.

Debate is raging over whether transaction monitoring should be welcomed, or whether it amounts to an unacceptable breach of privacy. You may have nothing to hide on your smartphone, but you would probably feel uncomfortable if someone had the ability to review your texts, emails, and photos.

As reported by Modern Consensus, Bitcoin author and evangelist Andreas Antonopoulos recently nailed his colors to the mast when he accused blockchain intelligence firms of “violating the civil rights of millions of people”—accusing them of being “in an arms race against privacy.”

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C Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption. He owns cryptocurrencies.

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