The case that questions the reliability of Chainalysis software is moving towards the sentencing of the alleged operator of Bitcoin Fog, despite ongoing doubts about his guilt.
According to The Rage, the United States government has recommended a 30-year prison sentence and a $100,000 fine for Roman Sterlingov, a Swedish-Russian citizen convicted of money laundering and operating an unlicensed money transmission business. Sterlingov is accused of running Bitcoin Fog, a custodial mixing service that allowed obscuring the origin of Bitcoin transactions.
The Sterlingov case has drawn attention for challenging the reliability of on-chain analysis techniques used by Chainalysis. Unlike other investigations, prosecutors did not present compelling digital evidence recovered from Sterlingov’s devices at the time of arrest. The prosecution relies on a combination of on-chain analysis, IP address matching, and connections between online accounts.
Despite the conviction on all four counts last March, anti-money laundering and on-chain analysis experts doubt whether Sterlingov actually operated Bitcoin Fog. The defendant maintains that he was merely a user of the service, not the operator.
J.W. Verret, a forensic expert called by the defense, stated that the case demonstrates how Chainalysis’ analysis tools are imperfect and should not be used to convict defendants facing decades in prison. According to Verret, there is no forensic evidence linking Sterlingov to the operation of Bitcoin Fog.
Laurent Salat, developer of the open-source on-chain analysis tool OXT Research, found incongruent results in Chainalysis’ data clustering. According to Salat, this could be due to misrepresentation of the heuristics used or a lack of reproducibility in the results of Reactor, Chainalysis’ proprietary software.
Previously, Elizabeth Bisbee, head of investigations at Chainalysis, acknowledged that Chainalysis’ clustering methodologies have not undergone a peer review process, as would occur for a scientific publication where data and methods would be independently examined by other experts in the field.
The judge, however, deemed the Reactor software “sufficiently reliable”, stating that absolute precision is not necessary for it to be useful as evidence.
Another controversial point in the case was the use of behavioral heuristics, such as transaction timing and address types, to link various transactions. According to a previous report by on-chain analysis company CipherTrace, significant discrepancies were found between their data and that of Chainalysis, advising against the use of such analyses in court.
As stated by CEO Michael Gronager, Chainalysis hopes that the decision will confirm the admissibility of such evidence, setting a precedent for the use of their analyses in court.
Following the conviction last March, Tor Ekeland, Sterlingov’s defense attorney, announced the intention to appeal.
