James Zhong’s fraud case involving bitcoin and the Silk Road online marketplace is one of the highest-profile examples of how federal authorities have pierced the veil of blockchain transactions, the Wall Street Journal reported. Private and government investigators can now identify wallet addresses associated with terrorists, drug traffickers, money launderers and cybercriminals, all of which were supposed to be anonymous. Law-enforcement agencies, working with cryptocurrency exchanges and blockchain-analytics companies, have compiled data gleaned from earlier investigations, including the Silk Road case, to map the flow of cryptocurrency transactions across criminal networks worldwide. In the past two years, the U.S. has seized more than $10 billion worth of digital currency through successful prosecutions, according to the Internal Revenue Service—in essence, by following the money. Instead of subpoenas to banks or other financial institutions, investigators can look to the blockchain for an instant snapshot of the money trail.
