Jonelle Still, the director of investigations and intelligence at CipherTrace, a Master Card company, recently submitted a report supporting the defense in the United States v. Roman Sterlingov, a criminal case involving the Bitcoin Fog cryptocurrency mixing service.
The company’s involvement in the case comes at the behest of Sterlingov’s defense attorneys, and includes a 41-page report detailing Still’s opinion on the efficacy of data obtained by the prosecution from blockchain investigation organization Chainalysis.
At the core of the report is the assertion that data provided by Chainalysis cannot be corroborated on-chain:“The blockchain forensics and tracing tools used in this case were misused to erroneously conclude that Mr. Sterlingov was the operator of Bitcoin Fog when no such evidence exists on-chain.”
Sterlingov has been accused by the United States government of being the founder of Bitcoin Fog, a cryptocurrency mixing service that allegedly participated in illegal money laundering transactions in the claimed amount of $336 million.
As cryptodirectories reported, Sterlingov was arrested in April of 2021 after a 10-year investigation resulted in the allegations. According to his attorneys, the criminal claims were based on evidence provided by Chainalysis.
In a recent podcast, Sterlingov’s legal representatives, Tor Eklund and Michael Hassard, laid out the case from their perspective. They assert that Chainalysis failed to trace transactions back to their client using data and instead merely provided the prosecution with an opinion on the matter of who founded Bitcoin Fog.
Eklund and Hassard claim that the government’s case is built on Chainalysis’ data and the assertion that in 2019 IRS agents sent a message to “whatever they think is the helpdesk or whatever” at Bitcoin Fog asking if the service would be good to launder Bitcoin they’d earned selling “Molly,” (a street name for 3,4-methylenedioxymethamphetamine).
Related: Darknet crypto mixer operator pleads guilty to laundering $300M in BTC
The lawyers claim that Bitcoin Fog never responded to the message and that the IRS agents went ahead and proceeded to use the Bitcoin Fog service in what the United States now claims was a laundering scheme. Eklund and Hassard say the government never actually sold molly for Bitcoin with the intent of laundering the proceeds through the Bitcoin Fog service.
The report provided by CipherTrace highlights some of the issues surrounding the Chainalysis data, including Still’s opinion that the conclusions drawn from it (that Sterlingov is the founder of Bitcoin Fog) cannot be demonstrated with on-chain data.
Still, the report’s author ultimately concludes that “Blockchain forensics should only be used to generate investigatory leads. Standing alone, they are insufficient as a primary source of evidence.” They continue to state that it is “striking” that the United States and Chainalysis reached the conclusions they did without “ any corroborating evidence for the blockchain forensics.”
“To prevent wrongful arrests like this one,” writes Still, “it is recommended that Chainalysis, and their methodologies of blockchain analysis be independently audited.”
As the United States has seized all of Sterlingov’s assets while he’s on trial, his defense team and CipherTrace have aided his legal efforts pro-bono.