Criminal bitcoins and money laundering

Publication date 24-04-2019

In November 2017 two investigations dealing with the conversion of criminal bitcoins into cash were brought before a Dutch court. The first investigation covered a drug dealer who operated via Darknet; the drugs were paid for in bitcoins, and the bitcoins were then converted into cash using a bitcoin dealer. The bitcoin dealer guaranteed anonymity in return for a high commission. The court ruled that by using a bitcoin dealer, the criminal origin of the bitcoins had been concealed.

In the second investigation the bitcoin dealer himself was put on trial. The dealer bought up large quantities of bitcoins that had been earned on Darknet, sold these through regular markets, and received a high commission. The court's premise was that practically all bitcoins from the Darknet have a criminal origin. An expert's investigation demonstrated that nearly exclusively illegal goods are traded on Darknet and that the only payment is with bitcoins. Given the high commission, the dealer must have known about the origin of the bitcoins, since 'a legal economic motive is lacking for selling bitcoins at the rate employed'.

In this investigation a bitcoin mixer also came up for discussion. Bitcoins paid out on Darknet had been mixed and then turned into cash. The reason for the use of a mixer was to conceal the origin of the bitcoins, the court said.

The judgements are in line with the money laundering typologies recently established in the Netherlands for monitoring the trade in virtual forms of payment and the use of a bitcoin mixer.