As we speak, the Attorneys for Manhattan and the State of New York are investigating a high net-worth individual for allegedly engaging in clever ways to avoid taxes and other regulations using activities that are legal when engaged by themselves in good faith, but when used in conjunction with each other in bad faith, may be criminal.

The problem with “gaming” any system involving state-level entities is that they always have the power to retroactively look at your behaviour and declare that there is a pattern that amounts to criminal behaviour, even if none of the actions taken in isolation would be considered criminal.

Give them no behavior to look back on.

Losing your monero wallet in a boating accident is also increasingly common these days

Is it all that different than a company claiming they are a victim of a ransomware attack and they paid the ransom?

Oh no, the hackers got our accounting database encrypted. We can't process your thing for 2 weeks and we paid 80M in crypto for ransom. Can we please get a tax write-off for our embezzlement?

I suspect existing anti-money-laundering law will cover this somehow. Outfoxing governments through technical cleverness rarely (but sometimes!) works in perpetuity.

An example: If any future >$10k transaction can be traced back to a wallet that you control (it wouldn't matter how you got the funds, only that you transferred them), then you'd be on the hook.

But why would you want to take (presumably) clean fiat on your coinbase account, exchange it for crypto, launder it, only to transfer back to your coinbase account? I'd presume anyone doing this is going to use the laundered money for illegal stuff, or at least transferring to some sort of offshore jurisdiction for tax evasion purposes. In both cases it won't be tied back to you.

When The Man gets a warrant to monitor your communications, arrests you, takes all of your electronic devices, and then chats with your friends and colleagues, there is a chance that they might uncover your "hidden" wallet.

Or, in the case that The Man gets a copy of the overseas bank's records with your name on it and a long and credible-looking list of transfers from wallets that match the amounts put into the mixer, it is going to look real suspicious.

Investigators are smart people with many tools at their disposal.

Until the very act of using a mixer is considered money laundering. Which is ironic because you started with clean money.

Or just convert to Monero and back

Dear weeweww32,

During a routine audit of registered exchanges we discovered that you transferred/received $30k of the crypto token Montero.

Under penalty of perjury provide us with documentation as to the destination/source of this funds within 7 business day.

Failing to do so is a felony under the Crypto act of 2022.

Cheerio

The Government

"During a routine audit of registered exchanges". The obvious answer here seems to be "don't use a registered exchange". Might cost a few basis points but nothing to be alarmed about and likely cheaper than taxes.

I might be missing something, but isn't part of the allure of it all being a blockchain the ledger that will, for ever after show that such and such wallet received 30k on a particular date & time - potentially requiring some stitching that would probably be trivial to do if the actual transfer was broken up into a series of smaller transfers?

And if you're using a shared wallet that obscures internal money movements then the feds can still see any entry/exit point activity - they might just be uncertain about what happened to the money in the middle.

I guess if you created a private coin for your nefarious dealings you could keep it really hidden (maybe one tied as a stable coin to a more major coin) - but only so long as you managed to keep the feds from getting a ledger view of the private coin - which would require limiting the spending power of that coin to only parties you strongly trusted which, again, would strongly devalue the coin.

The real world equivalent might be deciding, as a criminal ring, to use gems as a currency to avoid handling USD directly too often - but those gems become worthless apart from their inherent value as soon as trust collapses.

With Monero, no one can see the sender, destination or amount of any transaction.

But people can see the car/house/yacht etc you bought with it.

If you want to actually enjoy your wealth you better find a way to legalize your anonymous money and pay taxes on it.

"I dunno...It just appeared in my crypto Wallet" is not convincing

doesn't that require going through a centralized exchange, or at least going through the trouble of organizing an OTC trade?

There are decentralized exchanges like Bisq

The general term for Tornado.cash is a Bitcoin mixer and it has come and gone through the existence of Bitcoin.

Eg. Monero doesn't leave a trail by default.

Describing tornado.cash as a Bitcoin mixer is not accurate.

Exchanging BTC/ETH for Monero leaves just as much of a trail as using Tornado.cash, unless you use a decentralized P2P exchange.

Oh, from reading the Google seo description i didn't see it was fully on eth and it matched perfectly the description of a Bitcoin/crypto mixer.

Furthermore, it doesn't "mix" by creating lots of transactions and trying to obfuscate the trail--it completely cuts off the trail.

A Bitcoin mixer has no direct link fyi. Which is similar to their seo description.