Cryptocurrency Titan Coinbase provides “Geo Tracking Data” to ICE

Coinbase, the largest cryptocurrency exchange in the United States, Immigrations and Customs Enforcement sells a suite of features used to track and identify cryptocurrency users, according to contract documents shared with The Intercept.

In August 2021, Coinbase sold a single analytics software license to ICE for $ 29,000, followed by a software purchase potentially worth $ 1.36 million next month, but details of exactly what features would be offered to the agency’s controversial Homeland Security Investigations department were unclear. A new contract document obtained by Jack Poulson, director of the watchdog group Tech Inquiry, and shared with The Intercept, shows that ICE now has access to a number of forensic functions provided through Coinbase Tracer, the company’s intelligence gathering tool (formerly known as Coinbase) Analytics.

Coinbase Tracer allows customers, both in the public and private sectors, to track transactions through the blockchain, a distributed ledger of transactions integrated with the use of cryptocurrency. While blockchain logs are usually public, the sheer volume of data stored there can make it difficult to track money from user to recipient without the help of software tools. Coinbase markets Tracer for use in both corporate compliance and law enforcement investigations, highlighting its ability to “investigate illegal activities including money laundering and terrorist financing” and “cconnect [cryptocurrency] addresses of real devices. “

According to the document, released via a Freedom of Information Act request, ICE is now able to track transactions made through nearly a dozen different digital currencies, including Bitcoin, Ether and Tether. Analytical features include “Multi-hop link analysis for incoming and outgoing funds”, which gives ICE insight into transfers of these currencies, as well as “Transaction demixing and shielded transaction analysis” which aims to prevent methods some crypto users use to launder their money or camouflage their transactions. The contract also provides, provocatively, “Historical Geosporcing Data”, although it is unclear exactly what this data consists of or where it is taken from. An email released through the FOIA request shows that Coinbase did not require ICE to accept an end-user license agreement, standard legalese that sets limits on what a customer can do with software.

Asked about the ICE contract and the data involved, Coinbase spokeswoman Natasha LaBranche referred to The Intercept for a disclaimer on the website where they said “Coinbase Tracer retrieves the information from public sources and does not use Coinbase user data.” LaBranche did not answer questions about how ICE uses Coinbase Tracer, how it retrieves location data, or whether the company imposed any restrictions on ICE’s use of the tool.

In recent years, Coinbase has made a concerted effort to present its intelligence functions to government agencies, including the IRS, the Secret Service and the Drug Enforcement Administration. Earlier this month, Coinbase Vice President of Global Intelligence John Kothanek testified before a congressional panel that his company was eager to help Homeland Security. “If you’re an cybercriminal and use crypto, you’re going to have a bad day. ‘ Coinbase’s government work has proven to be very controversial for many cryptocurrencies, perhaps due to both the protracted libertarian streak in that society and the fact that these currencies are so often used to facilitate various forms of fraud.

The Coinbase Tracer tool itself was born into controversy. In 2019, Motherboard reported that Neutrino, a blockchain analysis company it acquired to create Coinbase Tracer, “was founded by three former employees of Hacking Team, a controversial Italian surveillance provider that was repeatedly caught selling spyware to authorities with questionable human rights registries, such as Ethiopia. , Saudi Arabia and Sudan. ” Following public outcry, Coinbase announced that these employees would “surpass” the company.

Homeland Security Investigations, the department of ICE that bought the Coinbase tool, is tasked not only with immigration-related cases, helping migrant raids and deportation operations, but also with broader transnational crimes, including various forms of economic crime. “The contract provides a tool that complements an HSI capability for investigators smuggling deadly opioids into the dark web and cybercriminals seeking to attack critical infrastructure,” an ICE spokesman wrote in a statement to The Intercept. “This tool does not disclose sensitive personally identifiable information, it is only referenced in criminal investigations, and it is not used in civil immigration enforcement.” The spokesperson did not answer questions about how accurately it has used Tracer or may in the future, including the use of location data, noting that “the agency does not provide details on investigation techniques, tools and / or ongoing investigations or operations.”

Update: July 2, 2022

This article has been updated with an answer from ICE.

Update: June 29, 2022

This article has been updated with a response from Coinbase and further details about the company’s business relationship with ICE.

Correction: June 29, 2022

An earlier version of this article incorrectly attributed a quote from Coinbase VP John Kothanek to the company’s CEO, Brian Armstrong.