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The FBI obtained the private keys through “good ol’ fashioned police work,” according to Coinbase’s CSO.
The Chief Security Officer of Coinbase has denied any involvement in the confiscation of crypto assets connected to the recent Colonial Pipeline ransomware incident.
On June 8, CSO Philip Martin took to Twitter to clarify the firm’s participation, or lack thereof, with the Department of Justice request for Bitcoin seizure.
“Coinbase was not the target of the warrant and did not receive the ransom or any part of the ransom at any point. We also have no evidence that the funds went through a Coinbase account/wallet.”
1/ I’ve seen a bunch of incorrect claims that Coinbase was involved in the recent DOJ seizure of bitcoin associated with the Colonial Pipeline ransomware attack. We weren’t. a thread:
— Philip Martin (@SecurityGuyPhil) June 8, 2021
The official seizure account, in which government officials collected 63.7 BTC, worth around $2.3 million at the time, was riddled with inconsistencies. Federal investigators claimed to have got the Darkside group’s secret keys but did not explain how they did so.
— This is Bullish (@thisisbullish) June 8, 2021
According to the affidavit, the private key for the subject address was in the possession of the FBI in the Northern District of California. This led to the connection with Coinbase which has servers in the area as a number of Twitter users pointed out. Martin refuted these claims stating:
“I’ve also read that because the seizure warrant specified property in the Northern District of California, it had to be targeted at Coinbase. Nope. What this likely means is that the private key is located at one of the many Northern California FBI field offices.”
He noted that it “wouldn’t make a tonne of sense” to pass over a specific private key owing to the exchange’s storage procedures, which employ a pooled hot wallet.
When asked how the investigators obtained the secret key, he assumed it was through “some good ol’ fashioned police work to locate the target servers,” followed by a mutual legal assistance treaty (MLAT) request and/or political pressure to gain access.
Concerns arose over the abilities of authorities to access the cryptographic keys which played a role in yesterday’s market drop. However authorities have a variety of innovative ways to access private information. On the same day, reports surfaced detailing a fake encrypted communications app used by criminals that was secretly operated by the FBI in order to surreptitiously collect messages, private information, and monitor criminal activity on a massive scale.
In a newsletter on June 8, the founder of Quantum Economics and a former Senior Market Analyst at eToro Mati Greenspan, stated that the recovered ransom was actually bullish for Bitcoin as many had expected U.S. politicians to use crypto as a scapegoat for the attack and to enforce some heavy-handed regulations.
“Instead, they were clued in to what we already knew, that it is easier for authorities to catch criminals who use crypto than anything else.”
Greenspan went on to say that the “only valid explanation for falling prices is that markets are random, especially in the short term.” Around the time of writing, BTC was down 2.2 percent in the previous 24 hours, trading at $33,000, having down more than 10% since the start of the week.