Federal Police Take Down ‘Dark Web Cryptocurrency Laundromat’, Seize $42M in Bitcoin

German and U.S. authorities today closed a “crypto mixer” allegedly used by criminals on the dark web to launder funds—and seized a load of Bitcoin in the process. 

In a Wednesday announcement, Europol said it dismantled the ChipMixer platform’s infrastructure, which it described as “one of the dark web’s largest cryptocurrency laundromats,” and seized $42.2 million-worth of Bitcoin, along with help from Belgium, Swiss, Polish, and U.S. federal law enforcement.

A coin mixer is an app that allows users to obfuscate the origin and destination of cryptocurrency movements by grouping various transactions together.

This particular coin mixing app may have been used to assist one of the biggest crypto hacks of 2022: a blockchain data analyst posted evidence on Twitter back in November showing that ChipMixer had been used by hackers who targeted bankrupt crypto exchange FTX. Hackers targeted the failed crypto company after it went bust and drained it of $446 million in tokens.

Authorities claim ChipMixer was “unlicensed” and was “attractive for cybercriminals looking to launder illegal proceeds from criminal activities such as drug trafficking, weapons trafficking, ransomware attacks, and payment card fraud.”

It was also used by ransomware groups like Zeppelin, SunCrypt, Mamba, Dharma and Lockbit, authorities allege. 

“This type of service is often used before criminals’ laundered crypto assets are redirected to cryptocurrency exchanges, some of which are also in the service of organized crime,” Wednesday’s announcement read. 

Coin mixers made headlines last year when the U.S. Treasury Department sanctioned the Tornado Cash platform because they said North Korean state-sponsored hackers were using it.

The move to target the app, which allowed people to send and receive Ethereum anonymously, upset the crypto community and some U.S. politicians who claimed people have a right to privacy. 

Dutch police also arrested Tornado Cash’s main developer Alexey Pertsev. 

But a demo of an update to the app—named Privacy Pools—was released earlier this month, which developers hope is designed with enough safeguards that it will not be blacklisted by authorities and will still give crypto users a degree of privacy.