As I wrote earlier, criminals have already learned about bitcoin mixers, but would be only a matter of time before law enforcement caught up. And once they set up departments and offices for investigating mixers, they were ready to strike. One of the first mixers to get seized was a site called BestMixer. It only lasted for over a year and was apparently used in a lot of money laundering cases.
Throughout the rest of the decade and the start of the new one, authorities worked diligently to identify which ones were the “bad mixers”. Then they’d get their mixer IP addresses and server locations, so that they could launch a raid of the servers. Some people claimed that bitcoin mixers in general were no longer safe, although evidence only points to previous heists and government actions. Frequent kidnapping activity involving bitcoin (and possibly mixers) caused Nigeria to ban it entirely, for example.
North Korea got in the act too. Its 414 Liaison Office started abusing bitcoin mixers by laundering stolen gains from cryptocurrency services. And that’s when the US really got ticked. The United States and other countries started to arrest many people who operated bitcoin mixers. And even people who wrote mixer software, whose purpose was to launder money. And they were ruthless. Seizures and sanctions had already been high through 2020. But two years later, they would accelerate.
I can’t really say this increased scrutiny was just on bitcoin mixers, because regulators started giving other services such as exchanges last warnings. A lot of exchanges closed shop in different parts of the world during that time. Also hardware wallet inspections started happening.
Exchanges Start Delisting Privacy Coins
The exchanges that chose to comply were forced to stop supporting privacy coins. Misinformed lawmakers believed that by stopping the purchase and sale of Monero, the crimes would stop. However, it is rarely as simple as that. Remember the bitcoin mixers I listed? None of them use Monero.
Binance, Coinbase, and FTX were among the large exchanges to drop privacy coins. Kraken held out for as long as it could, but it too had to succumb to bans. Naturally this angered the communities of those cryptocurrencies, but they were holding on to exchanges. They continued to provide free access to buying and selling Monero. In that regard, we can say that the blockade failed.
On an unrelated note, it feels ironic that these “gatekeepers of crypto” would try to block privacy coins in the name of safety. And yet they actively promote harmful shitcoins that frequently result in a total loss of funds. That screams money more than anything else. Then again, by delisting Monero, they also lost money. So let this reinforce your beliefs that exchanges only care about profit over anything else blockchain.
The Second Wave Of Private Exchanges
It is shortly after these events that a new generation of exchanges were being created. The old ones were still going strong, and remarkably were hardly subject to any criminal or government activity. The ones that did shut down did so voluntarily.
Exchanges such as Robosats, Wizardswap, Agoradesk and UnstoppableSwap were created during this period. A few scams were also created, but they must have realized that exchanges are not so profitable, because they all disappeared quickly.
It is also around this time when exchanges became widely adopted, mainly by people whose exchanges were giving them a hard time with their funds. Today they represent a glowing future of private coin exchanges, which can trade not only Bitcoin and Monero, but other coins such as Ethereum and stablecoins too.
The Use Of Sanctions To Curtail Mixer Money Laundering
Meanwhile, OFAC had already started sanctioning bitcoin addresses as early as 2018. Now let me explain briefly why they would want to sanction an address. Sometimes, after they seize a bitcoin mixer, the owners manage to spirit some funds away. Like what Nazis tried to do during World War Two. Authorities must ensure criminals cannot cash out this money, so they add the addresses to OFAC’s blacklist. Exchanges are supposed to enforce this.
Now, it’s one thing when crypto companies want to maintain their own blacklists. It’s a whole different thing when governments make a blacklist, because those addresses were used for serious financial crimes. And it was not just bitcoin addresses either. Ethereum and other cryptocurrencies were flagged as well. And in particular, most stablecoin issuers can freeze any address they want to with a click of a button. Which is all the more reason why you should use DAI instead of USDT or USDC. But that’s another story.
In cases when sanctions were not required, it was because law enforcement was easily able to recover funds from people who thought merely stashing them in cryptocurrency would provide anonymity. Boy were they wrong – as I have demonstrated earlier.
Tornado Cash
The most high-profile mixer sanction award has to go to Tornado Cash. But you would not find it on any bitcoin mixer list, because it is not a bitcoin mixer. In fact, it is an open-source Ethereum mixer. Now I don’t claim to be an expert in Ethereum, but Tornado Cash is a smart contract. Then there would be dApps on top of it, which lets you use the mixer from a Web3 wallet. As a consequence of it being a smart contract, you can still interact with it even today. In that regard, it is unseizable.
When the sanction hit in 2022, all these dApps started censoring access to the mixer. It even came to the point where the developers who made the mixer were de-platformed and arrested. It has raised some concerns in the DeFi community on how to deal with legal problems.
DPRK’s Mixers
Blender.io (yes, the name of the site was also the domain name) enjoyed an extremely brief time on Bitcointalk advertisements, before they themselves were sanctioned by OFAC on May 2022. I can probably explain the reason why their stint wasn’t longer is because they’ve only bought a few weeks worth of advertising. They also regularly had communication outages with the community, and it seems that they had finally disappeared by the time the sanction rolled out against them. Or did they?
About 5 months after they went dark, a new bitcoin mixer called Sinbad.io went live. Everyone thought they were some new mixer, until Elliptic alleged that the people who ran Blender sent it millions of dollars worth of cryptocurrency to start a new mixer. But nobody thought they were connected. Admittedly, I also did not think it was true at the time.
That all changed in November of 2023, when FIOD proudly announced in many places that they had seized the Sinbad bitcoin mixer. All of a sudden, all Sinbad addresses were placed on the OFAC sanctions list, including addresses used for advertisement and promotion. I strongly believe that FIOD gave these addresses to the US Treasury. Bitcointalk advertisers narrowly escaped sanctions (but never needed to worry about them in the first place as they are independent entities).
It was later exposed that the Blender.io and Sinbad mixers were just fronts for DPRK (North Korea) money laundering operations.
Interestingly, it appears that the Sinbad owner Mehdi is not on the run. He promised to post an update days after they seized the mixer, but the Bitcointalk administration banned his account before he could post it. Which makes sense if you think about it, because darknet sites are forbidden there.
Bitcointalk Bans All Mixers
The Sinbad case was the first time law enforcement seized a mixer and announced it on Bitcointalk. It appears that the administration was apprehensive that law enforcement could question or take an action against the forum, so it issued a total ban on mixer advertising. This came at a shock to pretty much everyone because the forum’s mission is “to be free as possible”. The community begrudgingly accepted it after much disquiet.
Such a ban meant that, among other things, making bitcoin mixer lists was no longer possible, hence why I created this site. It also brought the lush advertisement landscape for mixers to an end.
