1 00:00:15,276 --> 00:00:23,116 Speaker 1: Pushkin. Hello Against the Rules listeners, it's your long lost host, 2 00:00:23,156 --> 00:00:26,356 Speaker 1: Michael Lewis. I missed you, guys, and it's going to 3 00:00:26,396 --> 00:00:28,596 Speaker 1: be a little while before I come back, and I 4 00:00:28,596 --> 00:00:32,356 Speaker 1: want to explain what we're doing. I'm in the middle 5 00:00:32,396 --> 00:00:36,716 Speaker 1: of a book. It's about FTX, the cryptocurrency exchange that 6 00:00:37,156 --> 00:00:39,676 Speaker 1: has collapsed in the last few months in dramatic fashion, 7 00:00:40,356 --> 00:00:44,236 Speaker 1: and it's taking all my time. But there's this thing 8 00:00:44,276 --> 00:00:46,716 Speaker 1: I do with books. I do a lot of interviewing 9 00:00:46,876 --> 00:00:50,636 Speaker 1: around the book, stuff that's never going to be in print, 10 00:00:51,556 --> 00:00:55,076 Speaker 1: just to educate myself around the boundaries of my subject 11 00:00:55,596 --> 00:00:58,116 Speaker 1: and talk to a lot of interesting people. For this, 12 00:00:58,676 --> 00:01:01,316 Speaker 1: all the stuff winds up on the cutting room floor, 13 00:01:02,076 --> 00:01:04,676 Speaker 1: except in this case. So what we're gonna do is 14 00:01:04,676 --> 00:01:07,196 Speaker 1: basically call up a bunch of experts and talk to 15 00:01:07,236 --> 00:01:09,916 Speaker 1: them about what they know. You'll be getting the same 16 00:01:09,996 --> 00:01:12,996 Speaker 1: kind of education I get before I put words on paper. 17 00:01:14,156 --> 00:01:16,036 Speaker 1: I hope you find these people as interesting as I do, 18 00:01:16,476 --> 00:01:19,476 Speaker 1: and you can hold your breath until Against the Rules 19 00:01:19,596 --> 00:01:24,036 Speaker 1: is back out towards the end of the year. So 20 00:01:24,116 --> 00:01:28,436 Speaker 1: welcome to on background from Against the Rules. I'm Michael Lewis. 21 00:01:29,356 --> 00:01:32,236 Speaker 1: So the cryptocurrency movement arose on the back end of 22 00:01:32,276 --> 00:01:35,396 Speaker 1: the two thousand and eight financial crisis in response to 23 00:01:35,436 --> 00:01:39,356 Speaker 1: the crisis, in response to the perceived injustices of the 24 00:01:39,396 --> 00:01:44,716 Speaker 1: global financial system. The transparency, decentralization, and global nature of 25 00:01:44,716 --> 00:01:46,836 Speaker 1: the blockchain are supposed to have made it safer for 26 00:01:46,876 --> 00:01:51,036 Speaker 1: cryptocurrency traders and investors, but it also makes it easier 27 00:01:51,316 --> 00:01:55,116 Speaker 1: for bad actors to hide illicit activity. How much illicit 28 00:01:55,116 --> 00:02:00,036 Speaker 1: activity is there? The cryptocurrency analysis from Chain Analysis estimated 29 00:02:00,076 --> 00:02:03,516 Speaker 1: that there were fourteen billion dollars worth of shady dealings 30 00:02:03,516 --> 00:02:07,836 Speaker 1: in two twenty one alone. Tracking cryptocrimes could be a nightmare, 31 00:02:07,876 --> 00:02:10,596 Speaker 1: but there is a way, and I need to understand 32 00:02:10,596 --> 00:02:14,076 Speaker 1: the nitty gritty of how it's done. So I called 33 00:02:14,156 --> 00:02:17,756 Speaker 1: up Andy Greenberg, who's the senior cybersecurity writer for Wired, 34 00:02:17,836 --> 00:02:20,596 Speaker 1: an author of the new book Tracers in the Dark, 35 00:02:21,076 --> 00:02:25,156 Speaker 1: The Global Hunt for the Crime Lords of Cryptocurrency. I 36 00:02:25,236 --> 00:02:28,156 Speaker 1: love the book. It's a series of stories case studies 37 00:02:28,676 --> 00:02:33,516 Speaker 1: of cracking crypto crimes. It make a wonderful like episodic 38 00:02:33,676 --> 00:02:38,756 Speaker 1: television drama, and it explores the growth of illicit commerce 39 00:02:38,796 --> 00:02:42,836 Speaker 1: with crypto. Andy also follows some US law enforcement agents 40 00:02:42,876 --> 00:02:45,956 Speaker 1: who tracked illegal transactions around the world to figure out 41 00:02:46,316 --> 00:02:50,796 Speaker 1: how they did it. It reads like a thriller. You know, 42 00:02:50,876 --> 00:02:54,156 Speaker 1: I mentioned that I'm I've gotten very interested in the 43 00:02:54,196 --> 00:02:57,076 Speaker 1: FTX story, and I'm curious do you share an interest? 44 00:02:57,116 --> 00:02:59,196 Speaker 1: Have you been following it? Oh? Yeah, I mean I'm 45 00:02:59,236 --> 00:03:02,396 Speaker 1: interested in it, but like largely from the sidelines, because 46 00:03:02,396 --> 00:03:05,316 Speaker 1: it's not like a crypto crime story. It's not my 47 00:03:05,676 --> 00:03:08,836 Speaker 1: kind of story exactly, except for this one element of it. 48 00:03:09,356 --> 00:03:13,916 Speaker 1: Just after FTX declared bankruptcy, something like half a billion 49 00:03:13,956 --> 00:03:16,956 Speaker 1: dollars worth of cryptocurrency was pulled out of its accounts 50 00:03:16,996 --> 00:03:20,996 Speaker 1: by an unknown person, and that appears to have been 51 00:03:20,996 --> 00:03:24,716 Speaker 1: a much more traditional kind of straight up theft by 52 00:03:24,756 --> 00:03:26,996 Speaker 1: you know, we don't know who, like an insider, perhaps 53 00:03:27,036 --> 00:03:30,476 Speaker 1: Sam Bankman freed himself maybe, or you know, was it 54 00:03:30,596 --> 00:03:34,196 Speaker 1: hackers who just seized on the chaos of this meltdown 55 00:03:34,516 --> 00:03:37,436 Speaker 1: to try to pull off a big heist. It's precisely 56 00:03:37,476 --> 00:03:42,516 Speaker 1: the kind of heist that that your book suggests is 57 00:03:43,156 --> 00:03:46,436 Speaker 1: a fool's errand because that bitcoin, that crypto is going 58 00:03:46,516 --> 00:03:48,916 Speaker 1: to be traced and follow wherever it goes. Right, So, 59 00:03:48,956 --> 00:03:50,956 Speaker 1: as soon as this happened, you know, I started calling 60 00:03:51,516 --> 00:03:55,876 Speaker 1: my tracer friends and sources, I should say, and you 61 00:03:55,876 --> 00:03:58,596 Speaker 1: know they were following this money in real time as 62 00:03:58,636 --> 00:04:00,756 Speaker 1: it was being stolen. Basically, I mean, this is the 63 00:04:00,796 --> 00:04:05,076 Speaker 1: crazy thing about cryptocurrency, which is that like, even if 64 00:04:05,076 --> 00:04:08,236 Speaker 1: you can steal it, everybody can watch your getaway car 65 00:04:08,716 --> 00:04:12,036 Speaker 1: make every turn, you know, through the city map, and 66 00:04:12,116 --> 00:04:14,636 Speaker 1: like they're just waiting for you to try to get 67 00:04:14,676 --> 00:04:17,956 Speaker 1: out and cash that stolen money in somewhere at a 68 00:04:17,996 --> 00:04:20,116 Speaker 1: bank or whatever. I don't know what the end of 69 00:04:20,156 --> 00:04:23,116 Speaker 1: this metaphor is, but but they can follow you as 70 00:04:23,556 --> 00:04:25,916 Speaker 1: you do it, and it's going to be extremely hard 71 00:04:26,516 --> 00:04:30,596 Speaker 1: for whoever took that money to liquidate it, to use 72 00:04:30,636 --> 00:04:32,836 Speaker 1: it in any way without being identified, and then we'll 73 00:04:32,876 --> 00:04:36,516 Speaker 1: find out if it was an insider or a thief. 74 00:04:37,796 --> 00:04:41,956 Speaker 1: When you first got interested in crypto, in bitcoin, and 75 00:04:42,116 --> 00:04:45,476 Speaker 1: you know, a completely innocent person asked you to explain 76 00:04:45,516 --> 00:04:50,156 Speaker 1: to them what crypto was, what was your go to explanation? 77 00:04:50,636 --> 00:04:53,676 Speaker 1: I think I would have described it as just digital cash, 78 00:04:53,836 --> 00:04:56,356 Speaker 1: and in the sense that you can keep it under 79 00:04:56,356 --> 00:04:58,516 Speaker 1: your mattress, you can keep it on your computer and 80 00:04:58,556 --> 00:05:01,596 Speaker 1: nobody else has to know about that, and you can 81 00:05:02,116 --> 00:05:06,036 Speaker 1: spend this digital cash. This cryptocurrency in a dark alleyway, 82 00:05:06,436 --> 00:05:09,956 Speaker 1: without anybody, including the person you're sending it to, knowing 83 00:05:09,996 --> 00:05:14,076 Speaker 1: who you are. Right, that was pretty much the opposite 84 00:05:14,196 --> 00:05:17,476 Speaker 1: of correct. It turns out, you know, I now have 85 00:05:17,596 --> 00:05:21,716 Speaker 1: kind of realized, in this slow motion epiphany that cryptocurrency 86 00:05:22,316 --> 00:05:27,036 Speaker 1: is extremely traceable. I can remember the proselytizers coming on 87 00:05:27,116 --> 00:05:28,436 Speaker 1: to me and saying, you've got to write a book 88 00:05:28,436 --> 00:05:32,276 Speaker 1: about bitcoin because it's it's better money. And then you 89 00:05:32,356 --> 00:05:34,116 Speaker 1: went to go try to use bitcoin, and it was 90 00:05:34,116 --> 00:05:36,636 Speaker 1: clearly not better money. It wasn't you know, it makes 91 00:05:36,636 --> 00:05:39,516 Speaker 1: you long for dollar bills if you tried to spend bitcoin, 92 00:05:39,716 --> 00:05:41,596 Speaker 1: but that was what was in the air. You're sort 93 00:05:41,636 --> 00:05:44,116 Speaker 1: of like if you were hanging out with anybody who 94 00:05:44,196 --> 00:05:46,596 Speaker 1: knew anything about bitcoin, they said these things and you just, 95 00:05:46,956 --> 00:05:49,996 Speaker 1: you know, why not believe them? And it seems, you know, 96 00:05:50,076 --> 00:05:52,636 Speaker 1: looking back, like, you know, who could be this foolish? 97 00:05:52,676 --> 00:05:55,956 Speaker 1: Because the whole idea of bitcoin is that it's not 98 00:05:56,116 --> 00:05:59,276 Speaker 1: sort of guaranteed or like it's it's not accounted for 99 00:05:59,396 --> 00:06:02,596 Speaker 1: by any bank or government. Instead, it's all laid out 100 00:06:02,636 --> 00:06:06,316 Speaker 1: in the blockchain, like every single transaction is recorded in 101 00:06:06,356 --> 00:06:09,276 Speaker 1: the blockchain. And I knew that even back in twenty eleven. 102 00:06:09,396 --> 00:06:14,716 Speaker 1: But the thing that made me and possibly even Sotoshi Nakamoto, 103 00:06:14,836 --> 00:06:18,756 Speaker 1: this mysterious creator of bitcoin, think that it could nonetheless 104 00:06:18,836 --> 00:06:22,716 Speaker 1: be anonymous or untraceable, is that the blockchain only records 105 00:06:22,756 --> 00:06:26,716 Speaker 1: transactions between bitcoin addresses, these long strings of like you know, 106 00:06:26,916 --> 00:06:29,716 Speaker 1: thirty four numbers and characters that seemed meaningless and don't 107 00:06:29,756 --> 00:06:33,996 Speaker 1: seem to be tied to anything identifying at all. So 108 00:06:34,236 --> 00:06:36,676 Speaker 1: there's a distinction that needs to be made between anonymous 109 00:06:36,676 --> 00:06:39,236 Speaker 1: and untraceable. You can keep it secret who you are, 110 00:06:39,316 --> 00:06:42,076 Speaker 1: you just can't keep the transaction secret. I guess the 111 00:06:42,116 --> 00:06:45,436 Speaker 1: best way to describe it is not even anonymous or untraceable, 112 00:06:45,476 --> 00:06:48,156 Speaker 1: but rather pseudonymous if you want to like use the 113 00:06:48,596 --> 00:06:51,436 Speaker 1: nerdy term, which is like that you could send money 114 00:06:51,476 --> 00:06:54,636 Speaker 1: from one pseudonym a bitcoin address to another, and it 115 00:06:54,676 --> 00:06:56,476 Speaker 1: didn't seem like there was any way to kind of 116 00:06:56,596 --> 00:07:01,396 Speaker 1: pierce the veil of who is behind those bitcoin address pseudonyms. 117 00:07:01,996 --> 00:07:04,276 Speaker 1: So even though you could see like exact amounts of 118 00:07:04,316 --> 00:07:07,516 Speaker 1: bitcoin being sent from one pseudonym to the next, is 119 00:07:07,596 --> 00:07:10,636 Speaker 1: still seemed like this kind of you know, just like 120 00:07:10,676 --> 00:07:14,996 Speaker 1: a kind of dark basement full of money changing hands 121 00:07:15,036 --> 00:07:17,436 Speaker 1: but you didn't know between whom, and that seems you 122 00:07:17,476 --> 00:07:22,076 Speaker 1: know secret enough, right, So do you think Setoshi actually 123 00:07:22,076 --> 00:07:25,716 Speaker 1: thought that untraceability was a feature of this There wasn't 124 00:07:25,716 --> 00:07:28,796 Speaker 1: this email that Setoshi sent to a cryptography emailing list. 125 00:07:28,836 --> 00:07:31,076 Speaker 1: It's you know, listed these bullet points of like why 126 00:07:31,116 --> 00:07:34,596 Speaker 1: you should read my white paper basically, which includes participants 127 00:07:34,636 --> 00:07:37,316 Speaker 1: can be anonymous, and just to be fair, you know, 128 00:07:37,956 --> 00:07:40,396 Speaker 1: there is one participant who has remained anonymous, who is 129 00:07:40,476 --> 00:07:45,276 Speaker 1: Sotoshi Nakamoto, which is in itself an amazing story that 130 00:07:45,756 --> 00:07:48,036 Speaker 1: it's the only secret that's left in the universe who 131 00:07:48,076 --> 00:07:51,236 Speaker 1: Setoshi is. So who's the first person who attempts to 132 00:07:51,316 --> 00:07:56,276 Speaker 1: trace bitcoin and identify the people behind the accounts? Yeah, 133 00:07:56,316 --> 00:07:58,596 Speaker 1: I mean this whole story of the ability to trace 134 00:07:58,916 --> 00:08:02,036 Speaker 1: cryptocurrency begins, I would say with Sarah Michael John, this 135 00:08:02,356 --> 00:08:05,916 Speaker 1: graduate researcher at the University of California, San Diego who 136 00:08:05,996 --> 00:08:07,756 Speaker 1: kind of just embarked on it as a kind of 137 00:08:07,796 --> 00:08:10,396 Speaker 1: anthropological study. At first, she wanted to see if she 138 00:08:10,396 --> 00:08:13,276 Speaker 1: could figure out how many people are using bitcoin, how 139 00:08:13,276 --> 00:08:16,756 Speaker 1: many people are kind of like hiding behind these millions 140 00:08:16,876 --> 00:08:21,476 Speaker 1: of bitcoin addresses. But she very quickly began to see 141 00:08:21,516 --> 00:08:24,236 Speaker 1: that she could actually develop techniques to first just to 142 00:08:24,356 --> 00:08:29,076 Speaker 1: cluster these addresses to show that sometimes you know, dozens 143 00:08:29,156 --> 00:08:32,996 Speaker 1: or hundreds or sometimes even millions of these addresses belonged 144 00:08:33,076 --> 00:08:37,196 Speaker 1: to a single person or service or even like a 145 00:08:37,316 --> 00:08:40,996 Speaker 1: dark web marketplace. How did she do that? The first 146 00:08:40,996 --> 00:08:44,876 Speaker 1: trick is, sorry, this sound's really technical, but it's pretty simple, 147 00:08:44,956 --> 00:08:49,036 Speaker 1: which is that a so called multi input transaction, to 148 00:08:49,116 --> 00:08:51,316 Speaker 1: spend bitcoins from an address, you've got to control the 149 00:08:51,316 --> 00:08:54,516 Speaker 1: private key for that address. So if you're sending bitcoins 150 00:08:54,556 --> 00:08:57,756 Speaker 1: in one transaction from lots of addresses, you must control 151 00:08:57,796 --> 00:08:59,916 Speaker 1: the keys for all those addresses. And that proves that 152 00:09:00,636 --> 00:09:05,236 Speaker 1: one person or one organization, one service controlled all those addresses. 153 00:09:05,276 --> 00:09:08,196 Speaker 1: So you know, you can kind of go back in 154 00:09:08,276 --> 00:09:10,676 Speaker 1: time then and say, oh, all those addresses must have 155 00:09:10,836 --> 00:09:15,876 Speaker 1: belonged to this one cluster, like all those addresses were 156 00:09:15,956 --> 00:09:19,476 Speaker 1: one person or you know, one service. That's one trick, 157 00:09:19,996 --> 00:09:24,316 Speaker 1: and so this is Sarah Michael john Is is deducing this, Yeah, exactly. 158 00:09:24,356 --> 00:09:27,916 Speaker 1: And that's that's maybe the easiest trick that she It 159 00:09:27,956 --> 00:09:30,236 Speaker 1: was sort of like kind of an open secret that 160 00:09:30,436 --> 00:09:32,716 Speaker 1: was kind of a problem, but she was she kind 161 00:09:32,716 --> 00:09:37,476 Speaker 1: of applied it across the whole blockchain and immediately was 162 00:09:37,516 --> 00:09:41,636 Speaker 1: able to cut in half the number of possible identities 163 00:09:41,636 --> 00:09:44,436 Speaker 1: and show that you could cluster enough of these addresses 164 00:09:44,476 --> 00:09:48,156 Speaker 1: that immediately could see that there were only half as 165 00:09:48,156 --> 00:09:52,076 Speaker 1: many clusters as there were Bitcoin addresses, just with that 166 00:09:52,116 --> 00:09:56,596 Speaker 1: one trick. And her first question was how many people 167 00:09:56,596 --> 00:10:00,476 Speaker 1: are actually using bitcoin? As opposed to I wonder if 168 00:10:00,476 --> 00:10:03,036 Speaker 1: you can actually trace the transactions? I think so. I mean, 169 00:10:03,116 --> 00:10:05,556 Speaker 1: I think she really approached this as a researcher, like, 170 00:10:05,796 --> 00:10:08,196 Speaker 1: this is an interesting world, Let's see what we can 171 00:10:08,276 --> 00:10:10,676 Speaker 1: learn about it, and who these people are and how 172 00:10:10,676 --> 00:10:12,596 Speaker 1: many of them are. It is just the most basic question. 173 00:10:12,676 --> 00:10:15,836 Speaker 1: Perhaps that kind of multi input transaction trick was really 174 00:10:15,876 --> 00:10:18,516 Speaker 1: just one clustering technique. She came up with another one 175 00:10:18,796 --> 00:10:23,316 Speaker 1: that was based on change making in the bitcoin transactions. 176 00:10:23,316 --> 00:10:25,796 Speaker 1: This is like another weird feature of bitcoin, at least 177 00:10:25,796 --> 00:10:28,156 Speaker 1: with a lot of WATS software, is that when you 178 00:10:28,276 --> 00:10:31,436 Speaker 1: want to spend bitcoins from a bitcoin address, you can't 179 00:10:31,436 --> 00:10:33,396 Speaker 1: just spend like part of them. You have to crack 180 00:10:33,436 --> 00:10:35,956 Speaker 1: open the whole piggy bank and then basically send all 181 00:10:35,956 --> 00:10:38,316 Speaker 1: the money at that address and then get back the 182 00:10:38,436 --> 00:10:41,756 Speaker 1: change at a different address. So that means that you 183 00:10:41,796 --> 00:10:44,276 Speaker 1: see the money travel from one address to two. You 184 00:10:44,316 --> 00:10:48,796 Speaker 1: can basically follow around this one wad of cash as 185 00:10:48,836 --> 00:10:51,356 Speaker 1: like bills are peeled off of it, and it remains 186 00:10:51,396 --> 00:10:53,956 Speaker 1: the same wad of cash and the same person's possession, 187 00:10:54,476 --> 00:10:57,956 Speaker 1: even as it's kind of like spent slowly. And that's 188 00:10:57,996 --> 00:10:59,756 Speaker 1: another trick that allowed her to see like, oh, that 189 00:11:00,156 --> 00:11:04,316 Speaker 1: money still belongs to the same original person. And then 190 00:11:04,436 --> 00:11:06,796 Speaker 1: sometimes then that wad of cash ends up being sent 191 00:11:07,036 --> 00:11:10,876 Speaker 1: to a cryptocurrency exchange. And even back in twenty thirteen 192 00:11:10,916 --> 00:11:15,436 Speaker 1: when she was writing this, cryptocurrency exchanges were demanding know 193 00:11:15,556 --> 00:11:19,476 Speaker 1: your customer information, like your actual identifying information, and that 194 00:11:19,556 --> 00:11:22,556 Speaker 1: mean you've law enforcement can send a subpoena to that 195 00:11:22,636 --> 00:11:25,396 Speaker 1: exchange and get the identity. So if you can like 196 00:11:25,556 --> 00:11:29,076 Speaker 1: track someone's money, if you can identify a cluster and 197 00:11:29,076 --> 00:11:32,316 Speaker 1: then find the paths from that cluster out to an 198 00:11:32,316 --> 00:11:35,596 Speaker 1: exchange where they want to trade their bitcoins for dollars 199 00:11:35,676 --> 00:11:38,036 Speaker 1: or vice versa. And the other way to do it 200 00:11:38,076 --> 00:11:40,476 Speaker 1: is like and she did this too, you can kind 201 00:11:40,476 --> 00:11:45,276 Speaker 1: of interact undercover with addresses in that cluster and you 202 00:11:45,316 --> 00:11:48,356 Speaker 1: can see, oh, I'm putting money into a drug market 203 00:11:48,716 --> 00:11:50,716 Speaker 1: and this is the address that I am interacting with. 204 00:11:50,956 --> 00:11:52,996 Speaker 1: I know that address, and now I know that that 205 00:11:53,036 --> 00:11:57,196 Speaker 1: address is part of a big cluster. That cluster must 206 00:11:57,236 --> 00:12:02,196 Speaker 1: all belong to a big black market for drugs. I'm 207 00:12:02,276 --> 00:12:05,516 Speaker 1: riveted by her, and I'm interested in the kind of 208 00:12:05,556 --> 00:12:09,036 Speaker 1: responses to her work she might have gotten from other research, 209 00:12:09,276 --> 00:12:11,756 Speaker 1: but also like the crypto community, who must have taken 210 00:12:11,756 --> 00:12:14,316 Speaker 1: it as a full frontal assault. Yeah, I mean, I 211 00:12:14,356 --> 00:12:15,996 Speaker 1: tell these stories in the book. Like she she went 212 00:12:16,076 --> 00:12:18,916 Speaker 1: and spoke at one conference, and just over breakfast that morning, 213 00:12:18,956 --> 00:12:22,236 Speaker 1: she sat down with this kind of cryptocurrency privacy researcher 214 00:12:22,716 --> 00:12:25,796 Speaker 1: and they were kind of talking about, like, what are 215 00:12:25,796 --> 00:12:29,516 Speaker 1: the privacy properties of cryptocurrency as it stands, and this 216 00:12:29,596 --> 00:12:33,236 Speaker 1: cryptographer sort of posited, well, we need to develop systems 217 00:12:33,356 --> 00:12:38,956 Speaker 1: such that law enforcement cannot track these transactions no matter 218 00:12:39,116 --> 00:12:42,476 Speaker 1: what crime may be taking place, you know they're in 219 00:12:43,036 --> 00:12:47,196 Speaker 1: and Sarah responded, well, I don't know about that. There 220 00:12:47,196 --> 00:12:49,556 Speaker 1: are definitely there will be bad things that happen if 221 00:12:49,596 --> 00:12:53,356 Speaker 1: you truly can never trace these transactions. And then he said, 222 00:12:54,036 --> 00:12:57,476 Speaker 1: well you eat babies then, which I was kind of like, wait, 223 00:12:57,476 --> 00:13:00,996 Speaker 1: so there's nothing in between, but that's that is how 224 00:13:01,036 --> 00:13:03,636 Speaker 1: the conversations, and she remembers this very clearly. I mean, 225 00:13:03,676 --> 00:13:07,476 Speaker 1: she was shocked and somewhat offended, and I think only 226 00:13:07,516 --> 00:13:09,956 Speaker 1: then sort of realized that this was not going to 227 00:13:10,076 --> 00:13:12,876 Speaker 1: go over well in the sort of traditional crypto world. 228 00:13:14,836 --> 00:13:21,076 Speaker 1: There's something bizarre and wonderful about lots of basically guys 229 00:13:21,676 --> 00:13:26,276 Speaker 1: who think they're very smart, who have a perverse longing 230 00:13:26,356 --> 00:13:31,036 Speaker 1: for secrecy, who believe they have created an or encouraged 231 00:13:31,076 --> 00:13:37,156 Speaker 1: a technology that enables the secrecy being totally exposed by 232 00:13:37,436 --> 00:13:42,996 Speaker 1: just truth seeking young female academic. Absolutely, I mean, but 233 00:13:42,996 --> 00:13:47,556 Speaker 1: then she remains deeply ambivalent about it for her whole career. 234 00:13:47,596 --> 00:13:49,636 Speaker 1: I mean, you said, it's like a perverse instinct to 235 00:13:49,676 --> 00:13:52,116 Speaker 1: try to maintain secrecy, But there are good reasons for 236 00:13:52,156 --> 00:13:55,916 Speaker 1: financial privacy too, and financial surveillance is not always a 237 00:13:55,956 --> 00:13:59,676 Speaker 1: wonderful thing. And you know, I was lucky in a 238 00:13:59,716 --> 00:14:02,676 Speaker 1: way that like Sarah is the person who represents that 239 00:14:02,996 --> 00:14:07,596 Speaker 1: nuance and that complexity of the morality of surveillance. Basically 240 00:14:07,636 --> 00:14:10,836 Speaker 1: throughout the story, she actually like finds some of the 241 00:14:10,876 --> 00:14:14,996 Speaker 1: early big bitcoin thefts and then traces them and sometimes 242 00:14:14,996 --> 00:14:17,596 Speaker 1: shows that that money ends up at an exchange and 243 00:14:18,116 --> 00:14:20,796 Speaker 1: for a law enforcement agency with subpoena power, they could 244 00:14:20,796 --> 00:14:23,516 Speaker 1: go solve that crime right now, and she puts that 245 00:14:23,596 --> 00:14:26,316 Speaker 1: in the paper basically, so of course this gets the 246 00:14:26,316 --> 00:14:30,596 Speaker 1: attention of law enforcement, and she soon after has this 247 00:14:30,756 --> 00:14:34,436 Speaker 1: meeting with a federal agency, and she finds herself very 248 00:14:34,476 --> 00:14:37,236 Speaker 1: turned off by the way that they are talking about 249 00:14:37,396 --> 00:14:43,156 Speaker 1: privacy technologies and the dark web and cryptocurrency, and also 250 00:14:43,236 --> 00:14:46,756 Speaker 1: her advisor kind of jokes that she's become this cybernarc, 251 00:14:46,796 --> 00:14:52,676 Speaker 1: as he puts it. She finds herself torn between the 252 00:14:52,716 --> 00:14:57,916 Speaker 1: privacy community who doesn't particularly like love her research, and 253 00:14:58,276 --> 00:15:03,956 Speaker 1: the law enforcement agencies who she doesn't entirely want to 254 00:15:04,036 --> 00:15:08,516 Speaker 1: be a part of. On background, will be right back. 255 00:15:14,916 --> 00:15:17,476 Speaker 1: It's amazing to me that it takes five years from 256 00:15:17,516 --> 00:15:22,156 Speaker 1: the time Satoshi creates bitcoin for anybody, let alone an 257 00:15:22,156 --> 00:15:25,516 Speaker 1: academic at UCSD named Sarah Michael John to figure out 258 00:15:25,596 --> 00:15:28,716 Speaker 1: that bitcoin is actually traceable, and a whole other year 259 00:15:28,956 --> 00:15:31,956 Speaker 1: for Michael Groneger to create a business called chain analysis. 260 00:15:32,436 --> 00:15:35,116 Speaker 1: I mean, Michael was reluctant to kind of say to me, like, oh, 261 00:15:35,436 --> 00:15:38,636 Speaker 1: I just took all of Sarah's tricks, but he nonetheless says, yeah, 262 00:15:38,636 --> 00:15:41,836 Speaker 1: I read Sarah's paper it was fantastic. So I think 263 00:15:41,836 --> 00:15:44,596 Speaker 1: Michael Groneger would say, like, by then, certainly I would 264 00:15:44,596 --> 00:15:48,876 Speaker 1: have not only come up with these tricks, but as 265 00:15:48,876 --> 00:15:52,836 Speaker 1: he did, like built them into a polished, automated piece 266 00:15:52,876 --> 00:15:55,876 Speaker 1: of software that he could then sell to law enforcement. 267 00:15:57,316 --> 00:16:01,316 Speaker 1: So we're now onto like the real world applications of 268 00:16:01,356 --> 00:16:06,236 Speaker 1: Sarah's work and who takes it into the world. What's 269 00:16:06,236 --> 00:16:10,716 Speaker 1: the first big case where it's because of the kind 270 00:16:10,716 --> 00:16:13,396 Speaker 1: of tricks that Sarah turned up. Well, ch Green Dambarian 271 00:16:13,636 --> 00:16:16,636 Speaker 1: is in some ways like the real protagonist of my book, 272 00:16:16,636 --> 00:16:19,076 Speaker 1: and he is this like kind of fascinating character. He's 273 00:16:19,116 --> 00:16:23,716 Speaker 1: a criminal investigator for the IRS and a forensic accountant 274 00:16:23,716 --> 00:16:25,796 Speaker 1: and but also a computer nerd. And he had looked 275 00:16:25,796 --> 00:16:29,116 Speaker 1: at bitcoin from the beginning and had similar thoughts to Sarah, 276 00:16:29,196 --> 00:16:32,196 Speaker 1: like there's a whole blockchain here, how could participants be 277 00:16:32,236 --> 00:16:35,356 Speaker 1: anonymous like Sotoshi says? And then he was faced with 278 00:16:35,396 --> 00:16:39,076 Speaker 1: this case where in the wake of the takedown of 279 00:16:39,196 --> 00:16:43,876 Speaker 1: the first dark web black market for drugs, the Silk Road, 280 00:16:44,876 --> 00:16:47,956 Speaker 1: he could see that there's one VA agent who had 281 00:16:47,956 --> 00:16:50,596 Speaker 1: worked on that case was cashing out hundreds of thousands 282 00:16:50,596 --> 00:16:54,796 Speaker 1: of dollars worth of bitcoin of unknown origin, and he 283 00:16:55,676 --> 00:17:00,036 Speaker 1: guessed that this the EA agent Karl Mark Force, had 284 00:17:00,076 --> 00:17:02,476 Speaker 1: stolen it from the Silk Road or had somehow enriched 285 00:17:02,516 --> 00:17:04,636 Speaker 1: himself in the midst of his case, and so he 286 00:17:04,716 --> 00:17:07,796 Speaker 1: kind of just like I don't know, emboldened by Sarah's paper, 287 00:17:08,236 --> 00:17:11,956 Speaker 1: just sat down and started just clicking through bitcoin addresses 288 00:17:12,396 --> 00:17:15,996 Speaker 1: and was able to trace this corrupt DA agents bitcoins 289 00:17:16,116 --> 00:17:21,236 Speaker 1: back to the Silk Road, ultimately showing that Karl Mark Force, 290 00:17:21,356 --> 00:17:24,916 Speaker 1: this DEA agent, had been selling law enforcement information to 291 00:17:25,596 --> 00:17:29,036 Speaker 1: the creator of the Silk Road and being paid bitcoin 292 00:17:29,076 --> 00:17:32,636 Speaker 1: and exchange exactly and also trying to extort money from him. 293 00:17:32,996 --> 00:17:36,716 Speaker 1: So this is actually helps explain the tracking process. If 294 00:17:37,196 --> 00:17:41,036 Speaker 1: this corrupt the agent had sold government information to the 295 00:17:41,156 --> 00:17:44,636 Speaker 1: Silk Road bosses and been given bitcoin and just sat 296 00:17:44,716 --> 00:17:47,436 Speaker 1: on the bitcoin and never moved it, he would have 297 00:17:47,476 --> 00:17:51,796 Speaker 1: been unfindable, right So Fatig Green Gambarian, the case actually 298 00:17:51,876 --> 00:17:55,356 Speaker 1: begins when he gets a tip from a cryptocurrency exchange 299 00:17:56,236 --> 00:18:01,036 Speaker 1: basically that this sort of shady DA agents is cashing 300 00:18:01,036 --> 00:18:04,716 Speaker 1: out hundreds of thousands of dollars and is trying to 301 00:18:04,756 --> 00:18:06,716 Speaker 1: do it under a suit of him. That's the first 302 00:18:06,796 --> 00:18:11,836 Speaker 1: kind of giveaway and then of course, like at this point, 303 00:18:12,276 --> 00:18:15,556 Speaker 1: the silk Road, this dark web drug market has been seized, 304 00:18:15,916 --> 00:18:19,516 Speaker 1: so the FBI actually has all of its bitcoin addresses. 305 00:18:20,276 --> 00:18:22,596 Speaker 1: I think that Karl Mark Forrest is the agent just 306 00:18:23,116 --> 00:18:26,196 Speaker 1: never really reckons with the fact that all of this 307 00:18:26,236 --> 00:18:29,996 Speaker 1: would be captured in the blockchain. He believed, like everybody, 308 00:18:30,076 --> 00:18:32,636 Speaker 1: that bitcoin was untraceable, and then in fact it might 309 00:18:32,676 --> 00:18:34,396 Speaker 1: be kind of like the perfect kind of way to 310 00:18:34,436 --> 00:18:36,796 Speaker 1: skim off the top is that you're going to steal 311 00:18:36,876 --> 00:18:39,556 Speaker 1: untraceable money, how is anybody gonna catch you. It's a 312 00:18:39,556 --> 00:18:42,636 Speaker 1: funny idea that people might have been lured into criminal 313 00:18:42,676 --> 00:18:45,876 Speaker 1: activity because they thought they had a secrecy that didn't exist. Well, 314 00:18:45,876 --> 00:18:48,476 Speaker 1: you know, it's like this kind of eternal idea about 315 00:18:48,596 --> 00:18:52,756 Speaker 1: the Internet that like the anonymity there, or the perceived 316 00:18:52,836 --> 00:18:57,476 Speaker 1: anonymity like unlocks your darkest desires. And I think that 317 00:18:57,636 --> 00:18:59,756 Speaker 1: is true sometimes, and it seems to have been true 318 00:19:00,116 --> 00:19:04,956 Speaker 1: for Karl Mark Forrest, like he sort of was seduced 319 00:19:04,956 --> 00:19:07,716 Speaker 1: by this false promise of anonymity to become a corrupt 320 00:19:07,716 --> 00:19:10,196 Speaker 1: cop and it wasn't alone. Like that's the crazy thing. 321 00:19:10,596 --> 00:19:14,396 Speaker 1: T green Combarian then found like this other sum of 322 00:19:14,476 --> 00:19:17,996 Speaker 1: hundreds of thousands of dollars of bitcoin that people had 323 00:19:18,036 --> 00:19:21,156 Speaker 1: noticed was missing from the Silk Road, and everybody thought 324 00:19:21,196 --> 00:19:24,236 Speaker 1: that it must be the same corrupt EA agent. But Tigren, 325 00:19:24,276 --> 00:19:28,996 Speaker 1: who is now getting better at tracing cryptocurrency transactions by 326 00:19:28,996 --> 00:19:31,756 Speaker 1: this point on the blockchain, figures out that it's another 327 00:19:32,116 --> 00:19:35,236 Speaker 1: corrupt agent. The Secret Service agents based in the same 328 00:19:35,276 --> 00:19:39,836 Speaker 1: Baltimore office as the DA agent Carl Mark Force, And amazingly, 329 00:19:39,836 --> 00:19:42,556 Speaker 1: they were not even aware of each other's corruption. They 330 00:19:42,596 --> 00:19:45,156 Speaker 1: did this independently as far as anybody can tell, and 331 00:19:45,196 --> 00:19:48,036 Speaker 1: they were both just kind of, like, you know, seduced 332 00:19:48,116 --> 00:19:53,756 Speaker 1: by this same the same misunderstanding about bitcoin being essentially like, 333 00:19:54,076 --> 00:19:57,716 Speaker 1: you know, anonymous money that anybody can just grab and 334 00:19:58,116 --> 00:20:01,676 Speaker 1: steal and nobody can catch them. I feel like we're 335 00:20:01,716 --> 00:20:05,316 Speaker 1: in an episode of The Wire. Yes, there was a 336 00:20:05,356 --> 00:20:09,516 Speaker 1: spectacular case called Alphabet. Could you just describe that case 337 00:20:09,556 --> 00:20:11,716 Speaker 1: and the tools that the investigators used to crack it 338 00:20:11,756 --> 00:20:14,836 Speaker 1: and bring it down? When the Silk Road is taken down, 339 00:20:14,876 --> 00:20:18,596 Speaker 1: the first market this sort of combines the dark web 340 00:20:18,596 --> 00:20:22,156 Speaker 1: and cryptocurrency to try to create untraceable black market transactions. 341 00:20:22,476 --> 00:20:25,036 Speaker 1: That leaves this power vacuum that's filled by one market 342 00:20:25,116 --> 00:20:28,116 Speaker 1: after another, and they a lot of them, like run 343 00:20:28,116 --> 00:20:30,756 Speaker 1: away with everybody's money. The administrators steal the money and 344 00:20:30,756 --> 00:20:32,716 Speaker 1: what we call an exit scam. A couple of them 345 00:20:32,756 --> 00:20:36,476 Speaker 1: are taken down by law enforcements, and then finally a 346 00:20:36,516 --> 00:20:40,636 Speaker 1: new one surface is called Alphabet, that seems to have 347 00:20:40,756 --> 00:20:45,036 Speaker 1: made no mistakes, and law enforcements around the world cannot 348 00:20:45,116 --> 00:20:48,556 Speaker 1: find any way to identify its administrator, who goes by 349 00:20:48,676 --> 00:20:52,636 Speaker 1: the handle Alpha O two, and Alphabet eventually grows to 350 00:20:52,676 --> 00:20:55,116 Speaker 1: be ten times the size of the Silk Road and 351 00:20:55,276 --> 00:20:58,956 Speaker 1: is doing like millions of dollars in black market transactions 352 00:20:59,036 --> 00:21:01,316 Speaker 1: every day, and what kind of things are being traded? 353 00:21:01,476 --> 00:21:04,516 Speaker 1: Alphabet is sort of innovation? Is is that well? Alpha 354 00:21:04,556 --> 00:21:06,236 Speaker 1: O two, in fact, was it kind of credit card 355 00:21:06,236 --> 00:21:10,356 Speaker 1: fraudster originally a kind of traditional cyberchromin hacker. And so 356 00:21:10,596 --> 00:21:15,436 Speaker 1: he has this idea to combine the cybercrime frauds credit 357 00:21:15,436 --> 00:21:19,276 Speaker 1: card you know, hacking world with the narcotics market on 358 00:21:19,316 --> 00:21:22,676 Speaker 1: the dark web and creates this behemoth that sells both 359 00:21:22,796 --> 00:21:27,596 Speaker 1: kinds of contraband stolen data hacking tools like troves of 360 00:21:27,636 --> 00:21:30,996 Speaker 1: credit cards, but also heroin and fentanyl and meth ampheta 361 00:21:31,036 --> 00:21:34,596 Speaker 1: means and anything you can think of, So I can 362 00:21:34,796 --> 00:21:37,636 Speaker 1: I can buy stolen data along with my heroin? Yeah, 363 00:21:37,636 --> 00:21:40,596 Speaker 1: I mean why not. What's the first case where it's 364 00:21:40,676 --> 00:21:48,556 Speaker 1: really cracked just by cryptography? So cha Analysis by late 365 00:21:48,556 --> 00:21:52,916 Speaker 1: twenty sixteen and twenty seventeen has figured out basically how 366 00:21:52,956 --> 00:21:57,996 Speaker 1: to map out Alphabet's bitcoin addresses across the blockchain and 367 00:21:58,036 --> 00:22:01,396 Speaker 1: has created this like constellation of two point five million 368 00:22:01,476 --> 00:22:06,316 Speaker 1: addresses that it knows belong to Alphabet. But within that 369 00:22:06,396 --> 00:22:09,596 Speaker 1: it's it's still very difficult to identify, like in single 370 00:22:09,676 --> 00:22:14,636 Speaker 1: person's transactions, not to mention to try to identify the 371 00:22:14,716 --> 00:22:17,636 Speaker 1: kingpin of this whole black market Alpha O two. But 372 00:22:17,716 --> 00:22:22,076 Speaker 1: these two FBI agents in Washington, DC, who asked me 373 00:22:22,116 --> 00:22:25,036 Speaker 1: to just call them Ali and Aaron, they had this 374 00:22:25,076 --> 00:22:28,676 Speaker 1: idea of looking at those exit scams that I mentioned 375 00:22:28,676 --> 00:22:32,316 Speaker 1: where the boss of a dark web drug market just 376 00:22:32,556 --> 00:22:35,076 Speaker 1: steals everybody's money and runs off of it. They thought 377 00:22:35,076 --> 00:22:38,316 Speaker 1: of it this way, like when an exist scam happens, 378 00:22:38,756 --> 00:22:41,236 Speaker 1: kind of freaks out in the whole dark web economy. 379 00:22:41,516 --> 00:22:44,796 Speaker 1: They all start warning each other, don't store any of 380 00:22:44,796 --> 00:22:47,636 Speaker 1: your bitcoins on a drug market unless you're about to 381 00:22:47,636 --> 00:22:50,636 Speaker 1: spend them, because the administrator can steal them at any time, 382 00:22:50,676 --> 00:22:53,196 Speaker 1: and you've got to be careful about this. And so 383 00:22:53,236 --> 00:22:56,716 Speaker 1: everybody pulls out their money from those accounts. But the 384 00:22:56,756 --> 00:23:00,276 Speaker 1: one person Ali and Aaron realized who would not have 385 00:23:00,356 --> 00:23:02,916 Speaker 1: to worry about that would be the boss of a 386 00:23:02,996 --> 00:23:06,276 Speaker 1: dark web market him or herself. And so they had 387 00:23:06,276 --> 00:23:08,756 Speaker 1: this idea to just kind of look across this whole 388 00:23:08,796 --> 00:23:12,356 Speaker 1: alpha bay cluster that cha analysis had really assembled and 389 00:23:12,796 --> 00:23:16,396 Speaker 1: look for sums of money that had sat unmoved, like 390 00:23:16,556 --> 00:23:21,716 Speaker 1: large sums even as everybody else got spooked by exit scams. Yeah, 391 00:23:23,076 --> 00:23:26,436 Speaker 1: suggesting a sense of security in those pools of money exactly, 392 00:23:26,596 --> 00:23:29,276 Speaker 1: or just really suggesting that that probably belongs to someone 393 00:23:29,276 --> 00:23:31,516 Speaker 1: who is immune from an exit scam. It probably is 394 00:23:31,516 --> 00:23:34,396 Speaker 1: therefore a boss of a dark web market and or 395 00:23:34,476 --> 00:23:37,836 Speaker 1: really or really dumb, right, Yeah, that's also possible. So 396 00:23:37,916 --> 00:23:39,676 Speaker 1: they try this technique and they kind of combed through 397 00:23:39,676 --> 00:23:43,476 Speaker 1: all those alphabet addresses and finds several sums, but one 398 00:23:43,516 --> 00:23:47,036 Speaker 1: in particular that is really big has sat unmoved through 399 00:23:47,036 --> 00:23:51,236 Speaker 1: exit scams and then is eventually parceled out and trickles 400 00:23:51,316 --> 00:23:55,516 Speaker 1: out to a cryptocurrency exchange whereas cashed out and they 401 00:23:55,516 --> 00:24:00,476 Speaker 1: send a subpoena to that exchange. Now in the meantime, 402 00:24:00,796 --> 00:24:03,436 Speaker 1: that turns out that the Fresno office of the DA 403 00:24:03,596 --> 00:24:06,916 Speaker 1: got this tip that in the earliest days that Alphabet 404 00:24:07,036 --> 00:24:12,276 Speaker 1: was online, it's user forums. It turns out basically leaked 405 00:24:12,316 --> 00:24:15,596 Speaker 1: the email address of the administrator of Alphabet. This was 406 00:24:15,596 --> 00:24:18,516 Speaker 1: back in twenty fourteen when nobody was paying attention to Alphabet. 407 00:24:19,036 --> 00:24:23,196 Speaker 1: That this email address, which was pimp Underscore alex Underscore 408 00:24:23,276 --> 00:24:26,196 Speaker 1: ninety one at hotmail dot com, was in the metadata 409 00:24:26,276 --> 00:24:28,996 Speaker 1: of this email. But the First and office gets this 410 00:24:29,036 --> 00:24:31,196 Speaker 1: tip and they start looking at that email address. They 411 00:24:31,236 --> 00:24:35,516 Speaker 1: find other places where it has appeared in like forums online, 412 00:24:35,756 --> 00:24:39,116 Speaker 1: and they tie it to this French Canadian guy, Alexander 413 00:24:39,276 --> 00:24:43,756 Speaker 1: Kas who they then see has moved to Bangkok. Appears 414 00:24:44,276 --> 00:24:47,876 Speaker 1: based on his like wife's and his in laws social 415 00:24:47,916 --> 00:24:50,636 Speaker 1: media posts, to own a Lamborghini, to have a villa 416 00:24:50,756 --> 00:24:53,516 Speaker 1: in the south of Thailand, all this stuff and that, 417 00:24:54,036 --> 00:24:56,596 Speaker 1: and they so they are they caught an onto this, 418 00:24:57,036 --> 00:24:59,956 Speaker 1: but they don't have any real confidence in their lead. 419 00:25:00,116 --> 00:25:02,836 Speaker 1: They think it's almost like too good to be true. 420 00:25:02,876 --> 00:25:05,916 Speaker 1: Maybe somebody is setting up this guy cause to look 421 00:25:05,996 --> 00:25:09,836 Speaker 1: like Alpha O two. Even maybe he's being framed, and 422 00:25:09,996 --> 00:25:12,396 Speaker 1: just as they get this leads and they start to 423 00:25:12,396 --> 00:25:16,036 Speaker 1: look into it, the results from that subpoena filed by 424 00:25:16,116 --> 00:25:19,036 Speaker 1: Ali and Aaron across the country in the FBI office 425 00:25:19,476 --> 00:25:24,356 Speaker 1: come back in and it reveals that that cryptocurrency exchange 426 00:25:24,356 --> 00:25:28,316 Speaker 1: account is owned by none other than Alexander Kaz, essentially 427 00:25:28,436 --> 00:25:32,996 Speaker 1: like nailing this theory to a wall, you know, whereas 428 00:25:33,036 --> 00:25:37,116 Speaker 1: it had before kind of just hung by a thread. Yeah, 429 00:25:37,196 --> 00:25:42,196 Speaker 1: it's it's there. These stories are amazing stories, and the 430 00:25:42,276 --> 00:25:44,676 Speaker 1: more you tell them, the more I wonder why anybody 431 00:25:44,676 --> 00:25:47,516 Speaker 1: would try to do anything bad with crypto. Now, Well, 432 00:25:47,556 --> 00:25:48,916 Speaker 1: like you'd have to be a you'd have to be 433 00:25:48,956 --> 00:25:52,276 Speaker 1: a fool. I mean, Alexander kas was not dumb, no 434 00:25:52,316 --> 00:25:53,956 Speaker 1: matter how much we want to make fun of him. 435 00:25:54,116 --> 00:25:57,716 Speaker 1: He he did like try to you know, switch his 436 00:25:57,836 --> 00:26:01,636 Speaker 1: currencies midstream. He tried to put them through mixers and 437 00:26:01,956 --> 00:26:06,036 Speaker 1: other obfuscating tricks, some of which the FBI didn't even 438 00:26:06,116 --> 00:26:09,076 Speaker 1: really want to tell me how they defeated. Or Chain Alice, 439 00:26:09,316 --> 00:26:12,236 Speaker 1: who has also become you know, they are the masters 440 00:26:12,276 --> 00:26:16,556 Speaker 1: at defeating these obfuscation tricks. So you know, it's absolutely 441 00:26:16,796 --> 00:26:20,236 Speaker 1: I think a good maxim that's Bitcoin, especially of all 442 00:26:20,276 --> 00:26:25,476 Speaker 1: cryptocurrencies is the opposite of untraceable. But I think, especially 443 00:26:25,516 --> 00:26:29,156 Speaker 1: like you know, five six years ago, somebody like Alphos 444 00:26:29,156 --> 00:26:31,276 Speaker 1: who would have thought that they could stay a step ahead, 445 00:26:31,316 --> 00:26:33,316 Speaker 1: They would have thought that they were smart enough to 446 00:26:33,996 --> 00:26:38,436 Speaker 1: win this cat and mouse game. We'll be right back. 447 00:26:46,356 --> 00:26:50,156 Speaker 1: I'm back with Andy Greenberg on background. The question I 448 00:26:50,236 --> 00:26:53,356 Speaker 1: wanted to revisit is, given what you've learned about how 449 00:26:53,356 --> 00:26:58,556 Speaker 1: traceable crypto is, are you bewildered that we went such 450 00:26:58,596 --> 00:27:02,036 Speaker 1: a long period where people, really smart people thought it 451 00:27:02,036 --> 00:27:05,236 Speaker 1: it wasn't And how do you explain it? How do 452 00:27:05,276 --> 00:27:08,756 Speaker 1: you explain the kind of the myth of untraceability that 453 00:27:09,236 --> 00:27:11,276 Speaker 1: was all part of the bitcoin sales pitch early on. 454 00:27:12,996 --> 00:27:16,276 Speaker 1: I mean bitcoin was working, you know, it like had value. 455 00:27:16,316 --> 00:27:19,796 Speaker 1: It had gone from zero dollars exchange rate to one, 456 00:27:19,916 --> 00:27:23,476 Speaker 1: and that was amazing, and it looks pretty private, and 457 00:27:23,516 --> 00:27:25,076 Speaker 1: I think that that was enough for a lot of 458 00:27:25,076 --> 00:27:29,516 Speaker 1: people to want it to be true enough, and especially 459 00:27:29,756 --> 00:27:33,636 Speaker 1: the kinds of people who use cryptocurrency wanted to believe, well, 460 00:27:33,676 --> 00:27:36,316 Speaker 1: I can use this and just smart enough of a 461 00:27:36,356 --> 00:27:39,716 Speaker 1: way to stay a step ahead. And it was always 462 00:27:39,716 --> 00:27:43,516 Speaker 1: this kind of subjective judgments like yes of course, cryptocurrency 463 00:27:43,596 --> 00:27:47,076 Speaker 1: is traceable, but how traceable? I am kind of curious 464 00:27:47,076 --> 00:27:50,916 Speaker 1: to know. Do you have a sense that the revelation 465 00:27:51,636 --> 00:27:57,996 Speaker 1: that cryptocurrency transactions are are very traceable and very hard 466 00:27:58,036 --> 00:28:02,196 Speaker 1: to hide has sort of seeped into the consciousness of 467 00:28:02,236 --> 00:28:05,516 Speaker 1: the people who use cryptocurrency, and they're now very wary 468 00:28:05,676 --> 00:28:08,676 Speaker 1: of doing things. They're not making this mistake that they 469 00:28:08,676 --> 00:28:11,836 Speaker 1: think that what they're doing is secret, but it actually isn't. Yeah, 470 00:28:11,956 --> 00:28:15,916 Speaker 1: now I think yes, like cryptocurrency users have wised up 471 00:28:15,956 --> 00:28:19,996 Speaker 1: to what we, you know, all should have known all along, 472 00:28:20,036 --> 00:28:23,836 Speaker 1: which is that blockchains make things very traceable. The other 473 00:28:23,876 --> 00:28:26,596 Speaker 1: thing about blockchains is that they cannot be changed. That's 474 00:28:26,596 --> 00:28:29,156 Speaker 1: the whole idea. It's like you cannot alter them or 475 00:28:29,196 --> 00:28:32,796 Speaker 1: erase them. There they're like records copied out the thousands 476 00:28:32,796 --> 00:28:35,676 Speaker 1: and thousands of computers. If you once believe that your 477 00:28:35,716 --> 00:28:39,436 Speaker 1: cryptocurrency was untraceable and did something criminal with it, that 478 00:28:39,556 --> 00:28:43,756 Speaker 1: is written in stone for any investigator to go, you know, 479 00:28:43,916 --> 00:28:47,556 Speaker 1: excavate ends and use against you for years and years 480 00:28:47,556 --> 00:28:54,356 Speaker 1: to come. Iris criminal investigators making massive cases against people 481 00:28:54,396 --> 00:28:57,956 Speaker 1: accused of crypto crimes, sometimes even like ten years later, 482 00:28:58,076 --> 00:29:04,196 Speaker 1: based on blockchain evidence, is it basically impossible to use 483 00:29:04,316 --> 00:29:07,676 Speaker 1: that crypto without being caught. I don't want to say 484 00:29:07,716 --> 00:29:09,996 Speaker 1: it's totally impossible. I mean, I mean this mistake ten 485 00:29:10,076 --> 00:29:12,756 Speaker 1: years ago. I believe the bitcoin could be untraceable, so 486 00:29:12,876 --> 00:29:15,116 Speaker 1: nobody should listen to me, but it does. I don't 487 00:29:15,116 --> 00:29:18,156 Speaker 1: want to rule out that there is some way to 488 00:29:19,276 --> 00:29:23,836 Speaker 1: use cryptocurrency in an untraceable way. It seems almost like 489 00:29:24,236 --> 00:29:28,116 Speaker 1: the possibility is just vanishingly small. I am almost certain 490 00:29:28,476 --> 00:29:31,556 Speaker 1: that whoever took this FTX money will be identified through 491 00:29:31,556 --> 00:29:36,036 Speaker 1: cryptocurrency tracing, and you know, we'll find out if that 492 00:29:36,716 --> 00:29:41,196 Speaker 1: was Sam Bakman freed or some hacker in North Korea 493 00:29:41,276 --> 00:29:46,716 Speaker 1: or who knows. So that means whoever took the FTX 494 00:29:46,756 --> 00:29:52,356 Speaker 1: money either did not understand, which you understand, how traceable 495 00:29:52,636 --> 00:29:56,956 Speaker 1: crypto is, or maybe was playing some other game entirely, 496 00:29:58,316 --> 00:30:01,476 Speaker 1: never intending to use the money, just that maybe the 497 00:30:01,516 --> 00:30:03,796 Speaker 1: sole purpose of the theft was to create a theft, 498 00:30:04,396 --> 00:30:06,516 Speaker 1: or maybe they were just kind of looking at their 499 00:30:06,676 --> 00:30:10,556 Speaker 1: bank account dwindled to zero and their life savings evaporate, 500 00:30:10,636 --> 00:30:16,796 Speaker 1: and because they work for FTX, and they panicked and 501 00:30:16,956 --> 00:30:20,316 Speaker 1: tried to make themselves whole without really thinking about the consequences. 502 00:30:21,356 --> 00:30:25,596 Speaker 1: That sounds that sounds plausible. But now they realize they 503 00:30:25,596 --> 00:30:27,196 Speaker 1: can't do anything with it, so it's just going to 504 00:30:27,276 --> 00:30:29,836 Speaker 1: sit there. Right, So there's half a billion dollars of 505 00:30:30,916 --> 00:30:35,516 Speaker 1: unspendable bitcoin that was stolen out of FTX. What would 506 00:30:35,516 --> 00:30:40,076 Speaker 1: the Department of Justice need in order to seize it? 507 00:30:41,516 --> 00:30:45,876 Speaker 1: They know it's there, they can watch it. Why can't 508 00:30:45,916 --> 00:30:48,316 Speaker 1: they seize it? Well, let's see, here's a few ways 509 00:30:48,596 --> 00:30:52,476 Speaker 1: you could figure out, Like who took that money. You 510 00:30:52,756 --> 00:30:55,196 Speaker 1: see that the person who stole it is now keeping 511 00:30:55,236 --> 00:30:58,716 Speaker 1: it this address. You have a suspicion it's them. You 512 00:30:58,756 --> 00:31:01,356 Speaker 1: seize their computer, you find the private key for that 513 00:31:01,396 --> 00:31:04,796 Speaker 1: address on their computer. That's one way you see them 514 00:31:04,796 --> 00:31:07,356 Speaker 1: trying to cash it out. And at an exchange. They 515 00:31:07,356 --> 00:31:11,276 Speaker 1: think that they've laundered it enough that they can use 516 00:31:11,316 --> 00:31:14,996 Speaker 1: in exchange that has their identifying information and they cash 517 00:31:15,036 --> 00:31:17,276 Speaker 1: it out that way, or maybe they try to use 518 00:31:17,316 --> 00:31:19,676 Speaker 1: like a rogue exchange in another country, but you can 519 00:31:19,836 --> 00:31:23,116 Speaker 1: still find that they'd use their IP address or something 520 00:31:23,236 --> 00:31:26,156 Speaker 1: to cash it out, or maybe even you take down 521 00:31:26,196 --> 00:31:28,956 Speaker 1: that exchange and you seize its servers and you prove 522 00:31:29,036 --> 00:31:31,996 Speaker 1: that they cashed it out. There, or maybe you know, 523 00:31:32,596 --> 00:31:36,156 Speaker 1: just to include the full list of techniques. You interact 524 00:31:36,356 --> 00:31:39,556 Speaker 1: with their address in some way where you trick them 525 00:31:39,636 --> 00:31:42,796 Speaker 1: essentially into revealing their address through a kind of the 526 00:31:42,876 --> 00:31:45,356 Speaker 1: equivalent of like a buy and bust, and so you 527 00:31:45,396 --> 00:31:48,116 Speaker 1: know that that address belongs to a certain person and 528 00:31:48,156 --> 00:31:50,596 Speaker 1: that address is like where the stolen loot is being kept. 529 00:31:52,276 --> 00:31:55,596 Speaker 1: Who would be watching this pile of loot right now? 530 00:31:56,156 --> 00:32:00,596 Speaker 1: What law enforcement types or Chapter eleven people, or like, 531 00:32:00,676 --> 00:32:04,836 Speaker 1: how is it being monitored? Well, I rs criminal investigations. 532 00:32:05,076 --> 00:32:07,116 Speaker 1: They have made this almost like their bread and butter 533 00:32:07,316 --> 00:32:10,436 Speaker 1: to follow this money, to pay eiently wait for an 534 00:32:10,436 --> 00:32:14,516 Speaker 1: opportunity to identify who is sitting on these giant piles 535 00:32:14,556 --> 00:32:19,396 Speaker 1: of unspendable coins. The FBI has done this too. And 536 00:32:20,116 --> 00:32:23,036 Speaker 1: but you know, even beyond these law enforcement agencies and 537 00:32:23,276 --> 00:32:26,036 Speaker 1: the dj who oversees them all, there is like a 538 00:32:26,076 --> 00:32:31,076 Speaker 1: whole industry of private sector tracers, starting with chainalysis. You know, 539 00:32:31,116 --> 00:32:34,876 Speaker 1: it's funny to think that one of the subtexts of crypto, 540 00:32:34,996 --> 00:32:37,156 Speaker 1: or even the texts of crypto from the beginning, was 541 00:32:36,996 --> 00:32:39,756 Speaker 1: it was a way to operate outside of the purview 542 00:32:39,796 --> 00:32:43,156 Speaker 1: of government, to be invisible to that kind of surveillance, 543 00:32:43,516 --> 00:32:51,076 Speaker 1: and that crypto has become like the government's best business, 544 00:32:51,076 --> 00:32:55,036 Speaker 1: that it's been unbelievably profitable to the government to go 545 00:32:55,156 --> 00:33:00,276 Speaker 1: chasing after big piles of stolen crypto. Certainly, I mean 546 00:33:00,316 --> 00:33:03,636 Speaker 1: it's it is like very ironic that billions of dollars 547 00:33:03,636 --> 00:33:06,316 Speaker 1: worth of bitcoin I think still is sitting in like 548 00:33:06,356 --> 00:33:09,556 Speaker 1: the US treasury waiting to be sold as like you know, 549 00:33:09,596 --> 00:33:14,116 Speaker 1: the criminal proceeds basically. But also I think, just like 550 00:33:14,316 --> 00:33:17,316 Speaker 1: the crazier thing even than that, is just like how 551 00:33:17,356 --> 00:33:20,516 Speaker 1: well it has served the governments as a trap, like 552 00:33:20,596 --> 00:33:23,996 Speaker 1: as a honey pod for people who thought that they 553 00:33:24,036 --> 00:33:28,076 Speaker 1: could flout the government's financial surveillance, people who thought that 554 00:33:28,116 --> 00:33:31,396 Speaker 1: they could like do really criminal things, and instead it 555 00:33:31,516 --> 00:33:34,796 Speaker 1: just caught all of them, starting with like two corrupt agents, 556 00:33:34,796 --> 00:33:39,676 Speaker 1: but you know, stretching two people doing truly abhorrent things 557 00:33:39,756 --> 00:33:44,836 Speaker 1: with child exploitation, massive drug markets, and yeah, billions of 558 00:33:44,836 --> 00:33:49,836 Speaker 1: dollars and thefts too. So since crypto was first invented, 559 00:33:50,876 --> 00:33:52,836 Speaker 1: they've been all these stories about what it was for, 560 00:33:53,356 --> 00:33:55,716 Speaker 1: and the story has sort of changed along the way, 561 00:33:56,156 --> 00:33:59,196 Speaker 1: and each time it seems like crypto might be dead, 562 00:33:59,276 --> 00:34:02,236 Speaker 1: another story kind of arises. So take us ten years 563 00:34:02,276 --> 00:34:04,436 Speaker 1: from now, what is the story that people will be 564 00:34:04,516 --> 00:34:08,356 Speaker 1: saying about crypto, what it's for, how useful it is? Wow, Well, 565 00:34:08,356 --> 00:34:11,076 Speaker 1: you know, I kind of been waiting for you to 566 00:34:11,076 --> 00:34:13,156 Speaker 1: tell me that in your book. Like, I've never been 567 00:34:13,196 --> 00:34:16,596 Speaker 1: that interested in the legitimate uses of cryptocurrency. I don't know. 568 00:34:16,636 --> 00:34:18,356 Speaker 1: I don't feel like it's my job to figure out 569 00:34:18,356 --> 00:34:21,956 Speaker 1: why anybody should want to use cryptocurrency today, because it's 570 00:34:21,996 --> 00:34:27,956 Speaker 1: not exactly obvious. But but I do think like the 571 00:34:28,596 --> 00:34:31,396 Speaker 1: one part of this that I really will be following 572 00:34:31,556 --> 00:34:34,916 Speaker 1: in ten years is this mouse game that continues. I mean, 573 00:34:34,956 --> 00:34:39,556 Speaker 1: people really may have invented a truly untraceable form of 574 00:34:39,596 --> 00:34:43,156 Speaker 1: cryptocurrency already, in the form of ze cash or perhaps 575 00:34:43,236 --> 00:34:45,996 Speaker 1: even other ones. Ze cash really does seem like it 576 00:34:46,076 --> 00:34:53,596 Speaker 1: might be an actual, you know, black box, truly anonymous 577 00:34:53,596 --> 00:34:56,836 Speaker 1: form of digital cash for the Internet, and that will 578 00:34:56,956 --> 00:35:01,116 Speaker 1: be fascinating to watch. I mean, if there really is 579 00:35:02,356 --> 00:35:06,276 Speaker 1: a true crypto anarchic coin out there and it gains adoption, 580 00:35:06,836 --> 00:35:11,276 Speaker 1: then you know, that's a world we've never seen before. Great. 581 00:35:12,916 --> 00:35:15,196 Speaker 1: This was really helpful. It was helpful to me. Apart 582 00:35:15,316 --> 00:35:17,316 Speaker 1: from the podcast, it was really interesting to hear all 583 00:35:17,316 --> 00:35:19,756 Speaker 1: this well. Thank you. I really appreciate you talking to me. 584 00:35:20,036 --> 00:35:22,836 Speaker 1: Your book's great. Thanks for spending the time. Oh it's 585 00:35:22,916 --> 00:35:28,316 Speaker 1: my pleasure. Thank you. Andy Greenberg's a senior writer for 586 00:35:28,396 --> 00:35:30,796 Speaker 1: Wired and the author of Tracers in the Dark. The 587 00:35:30,876 --> 00:35:34,716 Speaker 1: Global Hunt for the Crime Lords of Cryptocurrency on Background 588 00:35:34,796 --> 00:35:37,476 Speaker 1: is hosted by me Michael Lewis and produced by Katherine 589 00:35:37,516 --> 00:35:42,876 Speaker 1: Gerardo and Lydia Jeancott. Our editor is Julia Barton. Our 590 00:35:42,916 --> 00:35:47,276 Speaker 1: engineer is Sarah Bruguire. Recorded by Tofa Ruth at Berkeley 591 00:35:47,276 --> 00:35:51,156 Speaker 1: Advanced Media Studios. Our music is created by John Evans 592 00:35:51,316 --> 00:35:55,596 Speaker 1: and Matthias Bossi of Stellwagon. Symponette on Background is a 593 00:35:55,636 --> 00:35:58,876 Speaker 1: production of Pushkin Industries. If you have any questions for me, 594 00:35:59,116 --> 00:36:01,916 Speaker 1: just remember that we have the website atr podcast dot 595 00:36:01,916 --> 00:36:04,476 Speaker 1: com where you can submit questions or complaints or whatever 596 00:36:04,516 --> 00:36:09,476 Speaker 1: you'd like to submit. That's atr podcast dot com. To 597 00:36:09,556 --> 00:36:14,316 Speaker 1: find more Pushkin podcasts, listen on the iHeartRadio app, Apple Podcasts, 598 00:36:14,796 --> 00:36:16,596 Speaker 1: or wherever you listen to podcasts.