IRS masquerades as a Bitcoin (BTC) seller to expose fraudsters

Thu 02 Sep 2021 ▪ 20h05 ▪ 3 min read — by Mary Anderson

Today, when people entrust all their passwords to corporations like Google or Apple and keep their money on bank accounts protected by those passwords, security has become of utmost value. Therefore, it’s the privacy provided by cryptocurrency exchanges that is appreciated the most. But cryptocurrency scammers can easily take advantage of this feature. Hackers very often manage to get away with the money since it is almost impossible to track them. For example, in 2020, illegal organisations’ transactions topped $5 billion (~£3.6 billion).

This does not mean, though, that there is no one to fight them. State security agencies are constantly coming up with new methods of combating such criminals. And the US Internal Revenue Service (IRS) is no exception.

The IRS Uses “Mr Coins” to catch an alleged drug dealer

To succeed in this complicated task the IRS decided to use a time-tested strategy, live bait fishing. In June 2020, an advertisement was placed on LocalCryptos by a certain “Mr Coins” with the IRS itself hiding behind this pseudonym. The advertisement offered to buy Bitcoin using mail. In order to get rid of unnecessary suspicions from the attacker, encrypted messaging apps were used to communicate with a potential fraudster.

So, under the nickname Lucifallen21, the alleged darknet drug dealer, Chase Hite from Evansville, Indiana, sent about $180,000 (~£131,000) in cash in several transactions to “Mr Coins” in exchange for BTC.

However, Chase Hite later learned that his parcel had been intercepted and marked as lost by the postal service. Of course, the IRS took care that Chase got this information. As a result, he called the post office to make a complaint, and during the call, the IRS was able to track his real number.

A search warrant followed, and the dealer’s involvement in this transaction was proved: they compared his fingerprints with the ones on the parcel. Thus Chase Hite, who denies his guilt, was charged in the Eastern District of New York. 

The IRS conducts covert operations in the crypto space

According to US law and the IRS guidelines, such methods can be justified if working undercover is the only way to obtain evidence.

It is not the first such trap set up by the IRS. Recently, they posed as a drug dealer on Bitcoin Frog, which provides anonymity of transactions for its customers, thus very popular among darknet dealers.

This means that the anonymity and confidentiality of the crypto space, exploited by hackers, can become a weapon against them, as IRS agents can also take advantage of it. Should have used Monero!

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Mary Anderson

I am sure that crypto assets are a new type of economy. We are at the origins of the crypto revolution. Right now, it is worth studying what cryptocurrencies and the blockchain are in order to make the most of this knowledge and these skills in the future.


The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

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