Online child sex abuse profiteering is possible with crypto exchanges
Mohammad was sentenced to 10 years imprisonment by a Dutch court after he was convicted of a variety of crimes. He distributed thousands of images and videos of child abuse and rape via Dark Scandals’ website. He made a dozen teenage girls record their sex and forced them to enter themselves. He raped and filmed two of them. (Online child sex abuse profiteering is possible with crypto exchanges)
His business was made possible by cryptocurrency exchanges, a new type of company. Mohammad’s customers used these platforms for digital token purchases with dollars or euros. They were able to spend the tokens anonymously. These tokens were Mohammad’s currency of abuse. Reuters reviewed transaction data and found that Dark Scandals customers used nearly 50 different exchanges including Binance and Coinbase.
Coinbase said to Reuters that the exchange was “not the right place” if a criminal is trying to escape. We have a zero tolerance policy on anyone engaging in illicit activities like child sexual abuse material.” Binance stated that it worked with law enforcement to take down Dark Scandals.(Online child sex abuse profiteering is possible with crypto exchanges)
Mohammad, a 26-year old student, turned to bitcoin after PayPal stopped him from launching his website. The judge stated that the payment provider had objected to the website’s pornographic content. PayPal did not respond.(Online child sex abuse profiteering is possible with crypto exchanges)
Mohammad, who stated “We love anonymity” at Dark Scandals’ website, used crypto to make the site one of the most popular marketplaces for illegally obtained sexual imagery. He attracted customers to the “darknet”, a network of illegal websites that are not visible to mainstream browsers.(Online child sex abuse profiteering is possible with crypto exchanges)
Mohammad charged clients cryptocurrency worth up to 200 euro ($205) for the ability to download video “packs”, which are hundreds of clips. Mohammad also offered to trade access to his collection in exchange for new videos. He required that the bartered material depict acts that he said were “forced against my will”. The court found that he earned 115,000 euros from his clients. He joins the growing number of criminals who profiteer from online sexual abuse.(Online child sex abuse profiteering is possible with crypto exchanges)
After an international investigation that involved U.S. law enforcement and Dutch police, Mohammad was detained in 2020. The blockchain software, which underpins cryptocurrency, allows authorities to track crypto transactions to Dark Scandals. This is done by publicly recording the date, value, and digital wallet addresses of customers’ transactions.
Users could transfer money to the site even if they didn’t have to give any personal information. An assistant U.S. Attorney testified that many of Mohammad’s accounts opened on eight different exchanges had no personal information or were fake.(Online child sex abuse profiteering is possible with crypto exchanges)
Zia Faruqui, the assistant U.S. Attorney, wrote that “this anonymity promoted success of the Dark Scandals websites.” She was responsible for overseeing the investigation that led Mohammad to be captured in the Netherlands. Faruqui did not identify the exchanges.
Reuters interviewed a number of experts on sexual violence, former and current law enforcement officers involved in child abuse investigations, as well as victims’ parents, for this article. Dark Scandals is a rare glimpse into the use of crypto by criminals. Reuters was able to attend Mohammad’s four day trial in Dordrecht’s district court. There, he and his victims gave hours worth of testimony.(Online child sex abuse profiteering is possible with crypto exchanges)
One girl, who he abused since the age of 14, testified that “you have destroyed my life” and “ruined all the beauty in it.” As the victim (18 years old) stood beside her, her lawyer read her statement. “I will never forgive” you for the things you did.
Mohammad was referred to as Michael M. by the court. He was sentenced in June to 10 year imprisonment for creating and distributing child abuse photos and sexually assaulting and/or raping minor girls. When it opened an indictment against Mohammad, the U.S. Justice Department fully identified him in 2020. His lawyer told Reuters that Mohammad had been wrongly convicted, and would appeal. He declined further comment.(Online child sex abuse profiteering is possible with crypto exchanges)
BCCI meets with police to discuss ways to combat crime
“Every day that Michael kept me locked up felt like a nightmare. I considered suicide every day. I felt empty. I couldn’t function normal. I experienced physical and mental pain.
In a statement that her lawyer read to her in court, an anonymous victim of Mohammad.(Online child sex abuse profiteering is possible with crypto exchanges)
The $1 trillion crypto industry is dominated by exchanges. They process billions of transactions every day and earn revenue from trading fees. These fees are typically around one percent. They have been subject to scrutiny by regulators and law enforcement due to their rapid growth.
In a September report, the U.S. Justice Department stated that many cryptocurrency exchanges “make little to no effort to comply with” know-your-customer requirements. Europol, the European Union police force, warned that digital currencies have become the “payment choice” for criminals who operate online.(Online child sex abuse profiteering is possible with crypto exchanges)
According to an investor presentation in 2014, Coinbase allowed users to transfer cryptocurrency between digital wallets for up two years without having to submit identification. To open an account with Coinbase, customers must now verify their identity. Binance was launched in 2017 and clients were able to open accounts using an email address until mid-2021.
The amount involved in selling and buying images of sexual abuse remains small when compared to other criminal activities like the drug trade. However, the numbers are rising. In the past, child abuse images were traded among offenders in small groups. But the darknet has now become a breeding ground to sites like Dark Scandals which charge crypto. The damage is extensive.(Online child sex abuse profiteering is possible with crypto exchanges)
U.S. agencies use Chainalysis to track illegal flows. Researcher Chainalysis estimates that crypto revenue from child abuse sites has jumped from $250,000 in 2017 up to $1 million in 2020.
Reuters examined Chainalysis data relating transactions via Dark Scandals’ digital wallets. These data reveal that 47 exchanges were used by customers of the site, including Coinbase, LocalBitcoins from Finland, and Binance. Between 2013 and 2019, a total amount of $22,000 worth of crypto was moved through Coinbase, LocalBitcoins and ShapeShift. As other platforms tightened their identity verifications, some trades were moved to Binance and ShapeShift. According to data, Binance and ShapeShift combined processed approximately $3,400 in trades until Dark Scandals were closed in 2020.(Online child sex abuse profiteering is possible with crypto exchanges)
According to the Internet Watch Foundation (a British hotline for child sexual abuse), the money involved does not reflect the severity of the harm done.
According to the IWF, the number of websites that have confirmed they contain such images has increased fourfold between 2016 and 2016, when it was just 41. The IWF also found that the number of websites selling virtual currency abuse imagery jumped from 41 to 1,014 in the same time period. The IWF stated that these sites often offered links to allow users to pay through crypto exchanges. However, they declined to identify companies.(Online child sex abuse profiteering is possible with crypto exchanges)
“Crypto has made it easier for people to make money off child sexual abuse,” stated Dan Sexton, chief technology officer at the IWF.
John Kothanek (Coinbase’s vice-president of global intelligence), told Reuters that the exchange collaborates with law enforcement to investigate child abuse cases and alert authorities to possible illicit activity. Accounts are also closed down. Coinbase boasts “dedicated, round-the-clock compliance, investigative teams, access specialized blockchain analysis tools and a best in-class process to identify criminals,” he stated.
Kothanek stated, “We will find and hold you responsible — this has been the case from day one at Coinbase.”(Online child sex abuse profiteering is possible with crypto exchanges)
Tigran Gambaryan is Binance’s global head for intelligence and investigations. He was a former agent of the U.S. Internal Revenue Service who was involved with the Dark Scandals investigation. According to Gambaryan, Binance and other exchanges provided records for the investigation team. Gambaryan stated that if it weren’t for crypto and the cooperation Binance provided the investigation team, the person behind the website wouldn’t have been identified. Local Bitcoins, Shape Shift and other companies did not respond to our requests for comment.(Online child sex abuse profiteering is possible with crypto exchanges)
