• The Taxman’s Bitcoin Honeytrap Snared A Darknet Drug Dealer

  • The Inland Revenue Service (IRS) is known to conduct sting operations in pursuit of tax evaders and criminals hiding in the pseudo-anonymous world of Bitcoin and cryptocurrency.

    Forbes obtained a search warrant, which detailed one such operation. It involved the IRS playing a long game in order to gain the trust of an alleged darknet drug dealer known as “Lucifallen21.”

    The tax agency was able to build a case against him after nearly a year of selling crypto to him for cash.

    Many people believe that criminals can hide using cryptography. But, as this case shows, that is not the case.

    Get Your Bitcoin Right Here

    The plot begins on the peer-to-peer cryptocurrency trading platform localcryptos.com, where an undercover agent with the username “Mr. Coins” is waiting.

    Mr. Coins had previously posted an advertisement on the platform offering Bitcoin and cryptocurrency services via mail. Furthermore, Mr. Coins had set a price that was higher than the market rate as an added incentive.

    “In June of last year, Mr. Coins ran an ad offering to buy bitcoin for cash via mail at above-market prices. All sellers needed to do was communicate via the encrypted messaging apps Wickr or WhatsApp.”

    Soon after, he received a message from Lucifallen21, who identified himself as Chase Hite of Evansville, Indiana. The IRS, however, made no comment on how they discovered this information.

    Following some back and forth over a month, Hite agrees to a deal in which he will post just over $15,000 in exchange for 1.59 Bitcoin.

    “By July, he’d agreed to buy from Mr. Coins, wrapping up $15,040 in cash in clothes, stuffing it into a box, and mailing it to the agent in exchange for approximately 1.59 bitcoin, according to the government’s account.”

    Another agreement was reached in August, resulting in a payment of $20,000 for 1.34 Bitcoin and 45.2 Monero. This pattern continued, resulting in a total of $65,000 being sent over the next few months.

    The Sting Has Arrived

    It was time for the IRS to shut down the operation in March 2021. IRS agents moved to initiate his most recent cash package, totaling $28,000, and updated its tracking status to lost in transit.

    They kept an eye on the post office’s customer service lines, waiting for Hite to call back. When he did, agents were able to trace the phone number back to an account in Hite’s name.

    Wickr messages revealed Hite’s connections with darknet drug deals, including the sale of cocaine and marijuana, throughout the process of gaining his trust.

    When the final package arrived, forensics extracted fingerprints from it and determined they belonged to the suspect.

    Over a ten-month period, Hite sent the IRS approximately $180,000 in cash in exchange for cryptocurrency.

    Hite was arrested in July with a mountain of evidence against him, but he has yet to enter a plea.

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