Chinese spies used bitcoin wallet Wasabi for bribes

Last Updated: 26 October 2022

Yesterday, the US Department of Justice announced that intelligence officers from the People’s Republic of China (PRC) paid bribes in bitcoin to a government employee. Analysis company Elliptic now comes out with more information about the transactions in a blog post.

CoinJoins

This involved a criminal investigation and a number of confidential documents. The Chinese agents reportedly wanted to get their hands on these and forward them to Huawei. However, they encountered a double agent of the FBI.

Spies Guochun He and Zheng Wang wanted to make two bitcoin payments. These bribes were worth a total of $61,000. The transaction involved $41,000 in BTC in November 2021. Later in October 2022, they sent another $20,000 in bitcoin.

According to Elliptic, the pair used the Wasabi Wallet to embezzle cash flows. Wasabi allows you to do CoinJoins, erasing the origin of an unspent transaction output (UTXO). It is a well-known tool for privacy advocates.

A CoinJoin is like a way where you throw your euro coins into a pot, to get the same amount (but different coins) out again.

Money flows

The chart below shows how payments of 1 bitcoin, 0.7 bitcoin and a minuscule amount were sent to the double agent. Which then sent it back to a US crypto exchange.

Interestingly, the same features that make bitcoin attractive to criminals (such as censorship resistance, pseudonymity and its international and digital nature) seem to make it interesting to intelligence agencies as well.

One might wonder where the dividing line between criminal and non-criminal lies in this regard.

Although the amount involved was relatively low, US official Thomas Ryder writes that the action is part of a wider pattern. According to him, the Chinese government is undermining international laws and the rights of individuals in this way.

Author

  • Ivan came across the topic of cryptocurrencies in early 2016 and, as an author and enthusiast, has been intensively involved with the topics of cryptocurrencies, blockchain and STOs ever since.

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