Criminals are cashing in on Bitcoins for illegal activity from buying drugs, hiring hitmen and forging passports on the Dark Web
THE smartly dressed young woman barely attracted a glance as she swept into the second-hand electronics store and approached the Bitcoin machine.
Standing there for half an hour, she peeled off £50 notes from a fat roll and fed them into the slot — until £10,000 in sterling had been converted into the electronic currency that only exists online.
When she came back the next day to do the same, store manager Simao Arinto became suspicious.
“It was £50 after £50 after £50,” said the boss of the CeX store in central London’s Tottenham Court Road.
“She told us she got some kind of insurance that paid out for some kind of disease. What was the truth? Who knows?”
The police, however, believe they do know the truth, warning this week that this fast-growing digital cryptocurrency is being exploited by organised criminals who use Bitcoin cashpoints to launder dirty cash.
Bitcoins were being traded for around $20,000 each yesterday as speculators created the biggest buying rush the world markets have ever seen.
Some exchanges saw the value of the digital currency 52 percent rise at its peak yesterday – with the past seven days seeing a 72 per cent rise.
The astronomical price increases–driven by demand for the coins the numbers of which are limited–are the biggest in the history of modern financial markets, even beating ‘Tulip Mania’, a 17th century financial crash that became known as the first financial ‘bubble’.
Bitcoin’s price has gone up faster in past three years than the price of tulip bulbs did before that bubble burst, according to figures from the New York firm Convoy Investments.
Now a Sun investigation has proved that Bitcoin is also linked to a range of serious crimes thanks to the anonymity it offers.
Within minutes of logging on to the Dark Web — an encrypted corner of the internet that can only be accessed by special browsers — we found organised criminals offering a chilling array of services.
For payment in Bitcoin, we could get a computer hacker to “destroy a business or a person’s life”, buy drugs, passports, cloned credit cards and counterfeit money or even order acid attacks, rape and murder.
Bitcoins only exist as lines of computer code and are created and stored online–and the surge in value means that criminals who had previously been paid in Bitcoin are seeing their wealth rise astronomically.
They can be ‘mined’ by computer users using software that both verifies other people’s transactions and generates a new ‘block’ of code by solving increasingly complex mathematical problems.
They were created in 2009 by Satoshi Nakamoto — an unknown person or group — but have surged in value by more than 1,400 per cent this year alone.
They hit a peak this week when one unit went from being worth £8,750 on Tuesday to £12,500 Thursday at the time of writing. The value has probably risen again since.
Bitcoin’s rapid rise is fuelled by the fact there is a limited supply — only 21million will ever exist — and that it is completely unregulated by banks and governments, making it attractive for criminals or those who want to keep their transactions secret.
One of the first sites we come across on the Dark Web is Dream Market, where a gram of super-strength cocaine costs 0.00344 of a Bitcoin, the equivalent of £43.
The vendor, called Drugkingz, promises to ship it anywhere in the UK or Ireland.
Another site, called Clone Card Crew, offers cloned credit cards, and boasts: “All cards are skimmed and cloned. They are legal to receive. Using them is a different thing.”
One truly disturbing site is Slayers Hitmen. The online agency claims to have 48 operatives worldwide who will inflict all sorts of physical attacks in return for Bitcoin.
An assassination by shooting costs the Bitcoin equivalent of £11,185. An acid attack is £3,000, rape £1,500 while a “scare” comes in at £750.
The site asks for 50 per cent of the fee to be deposited upfront in an online Bitcoin wallet.
At the UK Guns and Ammo site, you can buy a new 9mm Glock 19 pistol for 0.04 Bitcoins, worth £500. A new 9mm Walther P99 handgun goes for £650.
Yet another site offers “high quality” fake euros that will apparently pass UV and pen tests and work in vending machines.
Thirty bills, worth 600 euros, cost the Bitcoin equivalent of 315 euros.
Cryptocurrency specialist detective inspector Timothy Court, of the Met’s Organised Crime Group, said this week: “We are seeing criminals using Bitcoin to buy drugs and firearms on the Dark Web and also laundering money with it.
“Cash is hard to move for criminals but cryptocurrency is an easy way to move assets across borders.”
He added that it was an “emerging issue” which is being closely monitored by law enforcement agencies.
Julian Dixon, CEO of anti-money laundering and big data specialists Fortytwo Data, said: “I warmly welcome The Sun’s investigation.
“I hope the authorities sit up and take notice of this report, which suggests highly dangerous individuals and criminal organisations are using a cloak of anonymity surrounding Bitcoin to finance crime.
“Regulation of crypto-currencies is long overdue so the funding of these activities by worldwide criminals, in even the darkest region of the web, ceases.”
The Met’s Serious and Organised Crime Command is carrying out a cryptocurrencies training programme to help sharpen its officers’ awareness of the problem.
But they face an uphill battle combatting it, as detective superintendent Nick Stevens explains.
He said: “Cryptocurrencies are not illegal, but they are unregulated, decentralised currencies that can be quickly transferred across borders then converted into the currency of the country where the funds are received.”
He added that his team is currently investigating several major criminals who use Bitcoin and the Dark Web for “the supply of drugs, firearms, modern slavery and child exploitation”.
The CeX store in Tottenham Court Road is more used to customers buying and selling unwanted DVDs than arriving with large sums of cash.
But that could change now it is one of only 98 UK High Street shops to host a Bitcoin terminal.
Boss Mr Arinto told The Sun that the Bitcoin users he sees are a mixed bunch, but one trait unites them: A desire for privacy. This is not surprising.
The terminals offer an easy way for drug dealers and other criminals to launder cash without having to go through any bank checks.
After notes have been converted into Bitcoins, they can be moved anywhere in the world electronically then withdrawn as clean cash.
They are stored in a virtual wallet on a PC or mobile phone app and can then be withdrawn from another Bitcoin machine in the local currency.
This system makes the cash almost impossible to trace. Mr Arinto said: “I see people from all types of backgrounds. Some try to cover their faces and will look around to see if anyone is looking.
“Some of them come in and make the whole shop stink of weed.
“There is a £400 limit on deposits, but there is no limit on how many deposits you can make and no identity checks.
“You want to ask questions but it’s their personal life.”
That might be so, but it is a problem that has the potential to affect us all.
There are more than 1,300 cryptocurrencies in use, with new ones emerging all the time.
Bitcoin’s extraordinary growth has sparked alarm among police and intelligence agencies across the globe, with the Russian mafia in particular known to be capitalising on the phenomenon.
The Way It Works
BITCOIN is a form of digital currency, created and held electronically. It is produced by people running powerful computer programs to solve complex mathematical problems. Here we answer the main questions about it.
What makes it different from a normal currency? There are no physical notes or coins, so no single institution controls it. It exists only as lines of computer code. The value of Bitcoin is highly volatile, which has led people to buy it as a risky speculative investment.
Who created it? An anonymous software developer, or possibly developers, known as Satoshi Nakamoto.
Who prints it? No one. Bitcoin is created digitally by a community of people that anyone can join. Bitcoins are “mined” using computing power to solve puzzles and unlock currency units.
is there a limit on how many Bitcoins can be mined? Only 21million Bitcoins can ever be created by miners. However, these coins
can be divided into smaller parts. The smallest divisible amount is one hundred-millionth of a Bitcoin and is called a Satoshi, after the founder.
Is its use truly anonymous? You can set up a Bitcoin address in seconds – and it does not have to be linked to any name or address. But Bitcoin stores details of every single transaction that has ever happened in a huge version of a ledger, called the blockchain. This blockchain tells all about each purchase by each address linked to each Bitcoin.
Detective chief superintendent Mick Gallagher, head of the Met’s Organised Crime Command, says police have been aware of the threat for around 18 months but “at the moment it feels like there is significant growth”.
This week, the Treasury said that money-laundering regulations should be updated to include virtual currencies.
But while we wait for that to happen, law agencies have their work cut out to stop Bitcoin and its rivals allowing requests for serious crimes to be just a few clicks away.