A joint effort by the U.S. IRS Criminal Investigations, Homeland Security, and the Department of Justice (“DOJ”) brought down one of the largest child pornography rings operating on the Internet by following the bitcoin addresses and blockchains held by the users.

Two Sides to Bitcoin

Authorities have long warned that cryptocurrency would be appealing to criminals to use due to its anonymous nature and unregulated trade nature.  It appears that the tables have turned, however, as the U.S. government announced the takedown of one of the largest child pornography rings thanks to the tracking of bitcoin addresses and blockchains.

Welcome to Video Website Owner Indicted for Child Pornography Operations 

Last month, a U.S. federal grand jury indicted a South Korean citizen for owning and operating the largest child porn site by volume.  Jong Woon Son, 23, was charged as the owner of the Welcome to Video (“WTV”) website.  Son has also already been charged and convicted for similar charges in South Korea.  

Son’s WTV was one of the largest child pornography operations, offering videos for sale in exchange for bitcoin instead of having users share the videos and images over forums on the dark web.  The DOJ alleges that over a million downloads of illegal pornographic videos featuring children were downloaded via the website because the DOJ was able to identify over a million unique addresses trafficking on the website as WTV assigned a bitcoin address unique to each user once they created accounts on the website.

Law Enforcement Agencies Team Up to Track Bitcoin and Bust Online Child Porn Ring

In response, the Department of Justice launched one of the largest dragnets against the WTV users, arresting 337 site users, located across twenty-two U.S. states and eleven foreign countries.  The DOJ searched approximately one hundred residences and business in the United States and were able to rescue twenty-four minors that were being abused, often via live request from the site’s users. 

Because the website required the payment of bitcoin in exchange for its illegal wares, law enforcement was able to trace the payments of bitcoin and eventually follow the flow of funds on the blockchain back to account holders.  The DOJ has also filed forfeiture complaints, seeking to seize the virtual currency accounts that have been used in these illicit crimes.

Key Takeaways: The Manner in Which Cryptocurrency Can be Utilized is Ever-Growing 

Law enforcement agencies, previously warning against the use of cryptocurrency, are now learning that it can also benefit law enforcement as they better learn how to track it.  As such, there is optimism that law enforcement:

  • can bust other illegal trade rings using similar methods;

  • can seize funds used for illicit crimes to help pay back the victims of the crimes;

  • can deter others from profiting off such illicit activities; and

  • will be better able to recognize suspicious activities via cryptocurrency charts.