Sheep Marketplace — a Bitcoin-based market that grew sharply after Silk Road shuttered — was the target of a 96,000 Bitcoin (~£60m) hack last weekend. It turns out that laundering that much Bitcoin is very tricky, and the denizens of r/sheepmarketplace on Reddit have been taking countermeasures against the thieves (or thief) to track and de-anonymize the Bitcoin as it moves through various "tumblers" — services that obfuscate the origin and destination of Bitcoin fractions. It's an exciting chase across the darknet, full of math, intrigue, and crime.
A major problem with tumblers is that they only work with lots of bitcoins coming and going from a lot of different sources – if a tumbler is taking in 96,000 bitcoins, those will massively outnumber all other bitcoins being tumbled and it’ll be easy to spot them coming out the other end. Mix in a little of your own with all those other ones and you'll find out the wallet addresses that the tumbler uses, and it should be easy to spot large transactions splitting off from there.
The fascinating consequence of this is that you can see the stolen bitcoins on the public blockchain, and as long as there are people keeping tabs on it there’s going to be no way for the thief to cash in on their haul. Considering how people rely on tumblers to maintain anonymity when buying illegal stuff online, this unusual loophole is something of a revelation.
Right now, as you’re reading this, you can watch as the the thief starts trying to move their bitcoins on again – it’s currently down to 92,000 bitcoins and dropping as smaller chunks begin going out. Selling those bitcoins and turning them into cash is going to be extremely difficult, as the major Bitcoin exchanges all demand proof of identity (specifically to avoid charges that they're involved in money laundering), and if they're broken down into smaller quantities to sell via a site like localbitcoins.com a paper trail will still be generated. As soon as it's possible to link one real-life bank account or identity to any bitcoins from that stash, it will be possible to work out their real-life identity.
There's a £60m Bitcoin heist going down right now, and you can watch in real-time [Ian Steadman/New Statesman]
