What Bitcoin ransom recovery shows on cryptocurrencies and privacy.
The revelation this week that federal officials had recovered most of the Bitcoin paid in the recent Colonial Pipeline ransomware attack revealed a fundamental misconception about cryptocurrencies: They are not as hard to follow as cybercriminals think.
This is because the same properties that make cryptocurrencies attractive to cybercriminals – the ability to transfer money instantly without authorization from a bank – can be exploited by law enforcement to track and seize funds from criminals at the speed of the Internet, Reporting by Nicole Perlroth, Erin Griffith and Katie Benner from The New York Times.
Bitcoin is also trackable:
Digital currency can be created, moved, and stored outside the jurisdiction of any government or financial institution, but every payment is recorded in a permanent fixed ledger, called a the blockchain.
This means that all Bitcoin transactions are open. The Bitcoin ledger can be viewed by anyone connected to the blockchain.
On Monday, the Justice Department said it found 63.7 of the 75 Bitcoins – some $ 2.3 million out of $ 4.3 million – which Colonial pipeline had paid the hackers when the ransomware attack shut down the company’s computer systems, causing fuel shortages and a jump in gasoline prices. Officials have since declined to provide more details on exactly how they got the Bitcoin back.
“These are digital breadcrumbs,” said Kathryn Haun, former federal prosecutor and investor in venture capital firm Andreessen Horowitz. “There is a lead law enforcement can follow quite well.”
Given the public nature of the ledger, cryptocurrency experts said, all law enforcement needed to do was figure out how to connect criminals to a digital wallet, which stores Bitcoin.