[eco]

I'm curious how this works. As I understand it, Bitfinex would have do this by not broadcasting the transaction to the network and instead keeps it on a single miner and it gets included when the miner snags a block but how does that help launder money?

Is it some sort of deniability thing to say your hilariously unreasonable miner tip was mined by a random miner who may or may not be you? Surely regulators/prosecutors aren't this gullible.

[wpietri]

Regulation/prosecution is lagging way behind in this space. Even in traditional finance, Ponzi schemes and money laundering go on for years.

It's also important to consider the psychology of things like Ponzi schemes. A bright 12 year old can understand why a Ponzi scheme falls apart in the long run. But for most of the people running them, they aren't thinking about the long run. They're responding to short-term incentives. An investor wants money back? Well there's money, so let's give some to them. Low on money? Go out and sell more people on putting money in. People have concerns? Reassure them that everything's fine, better than fine, amazing in fact.

So the question of "do they think they can get away with it in the long run" is not really the right one to ask. 100% of their attention is on the short term. They carefully avoid thinking about the long run at all, because it's way too uncomfortable. As long as the problems are deniable enough in the short term, they're just going to keep going.

[toomuchtodo]

The cool part is all of these transactions are public and can be archived by regulators for long term forensics and enforcement activities while still within the statute of limitations. Might take years, but government can take its time investigating and prosecuting. Regulation can lag because there is no rush; the evidence is preserved by the very nature of the technology.

https://news.ycombinator.com/item?id=28673552 (HN: Tracking stolen crypto is a booming business) | https://archive.is/s1WvQ

[wpietri]

That's a positive for sure, but regulatory latency enables more scamming. That added burden to limited regulatory capacity mean the increased scamming makes it likelier that the small fry will get away.