Ethereum's ICO Created an Environment for Illicit Actors to Launder Criminal Proceeds on the Bitcoin Blockchain

A decade after Ethereum's initial coin offering, which raised $18.5 million in Bitcoin by selling roughly 60 million Ether, debates about whether

A decade after Ethereum’s initial coin offering, which raised $18.5 million in Bitcoin by selling roughly 60 million Ether, questions about whether different forms of manipulation tactics were involved still swirl in cryptocurrency communities on social media.

One theory questions whether the Ethereum founders double-spent investors’ funds to artificially inflate the success of the ICO while allowing them to close the sale with a larger share of Ether under their control.

Decrypt Magazine conducted a joint investigation with Canada-based blockchain forensics experts at Gray Wolf Analytics to determine whether the ICO included double-spending of Bitcoin, an activity deemed fraudulent by the presale’s terms and conditions. The investigation specifically looked for any Bitcoin that entered the presale wallet, was withdrawn and then looped back in.

Three batches of withdrawals took place during the sale. The Ethereum team pulled approximately 3,800 Bitcoin from the ICO deposit address, also known as the exodus wallet, claiming to use them to cover operational costs and loans. Upon examination, some subsequent transactions related to these outflows appeared to create loops in which relatively small quantities of Bitcoin returned to the deposit address.

However, the investigation found that although some transactions initially displayed double-spending characteristics, further analysis determined that the funds in question did not originate from the presale address.

“We concluded with a high degree of certainty that this was not the same BTC withdrawn from the exodus address,” Chedi Mbaga, head of forensics at Gray Wolf, tells Decrypt Magazine.

Nevertheless, the investigation found some funds with illicit origins, suggesting that bad actors used the Ethereum ICO to launder dirty Bitcoin for clean Ether.

In 2014, it was quite easy to participate in the Ethereum ICO. All you needed to do so was have some Bitcoin and an email address.

In one example, Gray Wolf’s forensic analysis traced 499 Bitcoin—the second largest single purchase in the ICO—to BTC-e, a now-defunct exchange notorious for serving illicit actors and laundering criminal proceeds.

While the investigation found no double spending in Ethereum’s presale, it was clear that no measures were taken to limit the sale of Ether to illicit actors.

The Ethereum Foundation did not respond to requests for comments.

Here’s where double-spending allegations can occur

Approximately 3,800 Bitcoin were withdrawn from the presale wallet during the 42-day ICO in three batches. The trail of one of these outflows shows Bitcoin dispersed to several wallets, and within a few transactions, a wallet is seen moving 53 Bitcoin into the exodus wallet “36PrZ1KHYMpqSyAQXSG8VwbUiq2EogxLo2.”

Additionally, there are several trails from the three batches of Bitcoin outflows that share these characteristics.

But Mbaga says that these trails could be mistaken as double-spending incidents, and blockchain records unveil an opposing narrative.

First, the “1L1JRVExeKiqBU1pmvoyzCfRzCfEP64pBJ” address is identified as the recipient address of the three batches of withdrawals. The first batch was a 1,150 Bitcoin transfer from the exodus wallet to 1L1J on August 11. From here, the Bitcoin appears to disperse to various wallets.

Most of those Bitcoin were sent to a second wallet, which then transferred 592 Bitcoin to a third wallet, and from there, 93 Bitcoin were sent to a fourth wallet.

The next transaction is where recycling allegations arise.

The following transaction by wallet four contains deposits from seven different addresses and two receiving addresses: Recipient A and Recipient B.

Recipient A is subsequently seen sending 53 Bitcoin to the exodus address. Without context, this could appear as if the 53 Bitcoin circled back into the ICO wallet.

But Gray Wolf’s analysis found that these Bitcoin trace back to the six other deposits within the transaction involving wallet four.

Meanwhile, the majority of the Bitcoin from wallet four were ultimately deposited to an Ethereum Foundation wallet through Recipient B.

“Those outflows (62.93 of the 93.313 BTC) traced from [wallet four] were deposited to an Ethereum Foundation wallet [and] we ultimately attributed the BTC deposited by [Recipient A] to different deposit paths in the backward trace,” Mbaga says.

他补充说，预售期间从 Exodus 钱包转移的资金行为反映了支付和运营成本，而不是恶意活动。

为什么比特币被撤回？

这并不是以太坊团队秘密取出的。出售期间的一些资金用于支付现有成本。

事实上，以太坊联合创始人 Vitalik Buterin 在偿还贷款和运营费用之前就宣布了提款。

“目的是从我们的出埃及地址中提取 4,150 BTC接下来 48 小时。我们保留撤回的权利

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