Monero (XMR) is a cryptocurrency that claims to offer complete anonymity and untraceability for its users. However, Finnish authorities have recently demonstrated that they can track Monero transactions in a high-profile criminal case involving a hacker who breached a mental health service provider and extorted its patients.
The Vastaamo Hack and Ransom Demand
In October 2022, a hacker identified as Julius Aleksanteri Kivimäki hacked into the database of Vastaamo, a private psychotherapy service provider in Finland, and accessed the records of over 33,000 patients. The hacker then demanded 40 Bitcoin, equivalent to about 450,000 euros at the time, from Vastaamo in exchange for not leaking the sensitive data online. When the ransom was not paid, the hacker started to target individual patients and threatened to expose their personal information unless they paid a smaller amount in Bitcoin.
The hacker received some payments in Bitcoin from the victims, but did not stop the data leak. Instead, the hacker used a non-compliant exchange to convert the Bitcoin into Monero, a privacy-focused cryptocurrency that obscures the source and destination of transactions. The hacker then transferred the Monero to a dedicated wallet, hoping to evade detection and traceability.
The Breakthrough of Finnish Authorities
However, the hacker’s plan did not work out as expected. The Finnish National Bureau of Investigation (NBI) reportedly made significant progress in tracing Monero transactions as part of the ongoing criminal trial of Kivimäki. According to local media reports, prosecutors unveiled new evidence on January 22, 2024, revealing a crypto trail that led to Kivimäki’s bank account.
The NBI managed to track the Monero transactions from the hacker’s wallet to Binance, a popular cryptocurrency exchange, where the hacker exchanged the Monero back to Bitcoin. The NBI then followed the Bitcoin transactions to various other wallets, and eventually to Kivimäki’s bank account. The NBI did not disclose the details of how they performed the on-chain analysis, but it is likely that they used some advanced tools and techniques to break the privacy of Monero.
This is a remarkable achievement for the Finnish authorities, as Monero is widely considered to be one of the most secure and anonymous cryptocurrencies in the market. Monero uses several privacy-enhancing technologies, such as ring signatures, stealth addresses, and ring confidential transactions, to hide the identities and amounts of the parties involved in a transaction. Monero’s official website states that it is “untraceable” and that “all transactions are private by default”.
The Implications of the Crypto Forensics Breakthrough
The crypto forensics breakthrough of the Finnish authorities has several implications for the crypto industry and the society at large. On one hand, it shows that privacy coins like Monero are not immune to law enforcement and regulation, and that criminals who use them for illicit purposes may not be able to escape justice. On the other hand, it also raises some concerns about the privacy and security of legitimate Monero users, who may value their financial sovereignty and anonymity for various reasons.
The case of Kivimäki and the Vastaamo hack is not the only one that involves Monero and privacy coins. In recent years, there have been several instances of hackers, ransomware attackers, and cybercriminals demanding payments in Monero or other privacy coins, as they believe that they can avoid detection and traceability. However, as the Finnish authorities have shown, this may not be the case anymore.
The crypto community and the regulators have been debating the role and regulation of privacy coins for a long time. Some argue that privacy coins are essential for protecting the human rights and freedoms of individuals, especially in oppressive regimes or surveillance states. Others contend that privacy coins pose a threat to the public safety and security, as they enable money laundering, terrorism financing, and other criminal activities. The crypto forensics breakthrough of the Finnish authorities may add more fuel to this debate, as it challenges the assumptions and expectations of both sides.