Posted 1 month ago | by Catoshi Nakamoto
Coinbase plagued by various scandals over the years, once a target of the IRS, now wants to sell blockchain analysis software to the IRS and federal government.
Arguably one of the most significant U.S. cryptocurrency businesses is seeking to go against its customers by arming the feds with tools to go after cryptocurrency holders who don’t report their holdings to the U.S. government.
COINBASE MAKES A MILLION DOLLAR DEAL WITH ICE
Coinbase has now announced a $1.36 million deal with Immigration and Customs Enforcement (ICE). The agency is now free to use Coinbase’s Analytics tool for undisclosed classified reasons.
Coinbase and the Immigration and Customs Enforcement branch of the U.S. Homeland Security have struck a million-dollar deal which will allow the U.S. government’s ICE to use the exchange’s analytics services to analyze data.
According to documents from the Federal Procurement Data System, it is unclear what information will be analyzed or shared by Coinbase with the agency. The contract states that Coinbase will assist ICE in “business application” and “application development software,” with not much more information available. The SAM.gov database also states that the exchange “is the only vendor who can reasonably provide the services required” by the ICE, and the information available to the public will be minimal due to the sensitive nature of the relationship between the ICE and Coinbase.
This is Coinbase’s largest federal contract to date. Coinbase has previously signed a deal with the U.S. Secret Service (SS) and a previous deal with ICE to license its Coinbase Analytics tools to both agencies. The SS contract wil remain until May 2024 and only netted Coinbase $183,750.
A prior deal with ICE earlier this year was for $29,000 for forensics software. According to a document dated August 3rd, the contract was given to Coinbase on the basis that the company is “the only vendor who can reasonably provide the services required by the agency.”
Past Scrutiny From Deals With Government Raise Privacy Issues
In the past, Coinbase has endured substantial criticism for its collaboration with the U.S. government and various agencies. Despite this Brian Armstrong the CEO of Coinbase has never regretted any of these lucrative deals it makes with law enforcement officials.
In a previous Twitter thread, Brian Armstrong swore that the creation of this service is a positive move for the growth of Coinbase asserting that the company does not deliver information other than what is publicly available on the blockchain:
“Have seen a few articles talking about Coinbase Analytics – figured I would share my thoughts on it, since I don’t think it’s particularly newsworthy – and lots of conjecture out there. Blockchain analytics software is essentially just compiling publicly available data that is already out there on the blockchain … There is an existing market for blockchain analytics software, so we sell it to a handful of folks as well.”
Armstrong later deleted the entire thread due to public blowback and flaming of his comments, but an archived version is available on archive.org.
It’s far from new to see Coinbase working with law enforcement. According to public records, obtained by The Block the U.S. Drug Enforcement Administration (DEA) and the Internal Revenue Service (IRS) intended to buy licenses from Coinbase for its analytics platform called Coinbase Analytics as far back as last year. Documents related to the purchases by the IRS and DEA were published in April and May of 2020.
The IRS contract was only for one year, netting Coinbase $124,950.00 at the time.
For newer readers, it’s important to highlight where Coinbase’s Analytics platform came from an acquisition of a company called Neutrino. Bitboy Crypto has previously done an investigative report on Neutrino, but, most of you probably have never seen it. That’s because that was before the channel absolutely exploded in popularity. If you have never heard of Neutrino, allow this writer to educate you on the company and its past scandals.
Coinbase And Neutrino Acquisition
Coinbase acquired an Italian blockchain intelligence platform called Neutrino in 2019. At the time Coinbase told CoinDesk that, “This is particularly important as we work with regulators and agencies in different countries to bring new assets there,” Coinbase’s director of engineering and product, Varun Srinivasan, told CoinDesk. He added that Neutrino would help Coinbase identify “which new tokens are gaining value and gaining traction in the space.”
That wouldn’t be a problem if that was the goal, however, as filings show, we know that’s not the reason Neutrino was acquired for $13.5 million.
Neutrino’s eight employees then moved into Coinbase’s London office, this caused massive blowback because Neutrino was involved in other illicit activities. For those that don’t know Neutrino, here’s a basic breakdown of the company.
“Founded in 2016, Neutrino consists of a team of cybersecurity specialists who are involved with technology exploitation and intelligence gathering. Neutrino supplies investigative solutions to the crypto experts within leading financial services companies and law enforcement agencies. Neutrino develops solutions for monitoring, analyzing and tracking cryptocurrency flows across multiple blockchains.”
Shortly after the acquisition, Neutrino’s founders were directly affiliated with Hacking Team — a controversial information technology group that purportedly sold offensive surveillance capabilities to governments, law enforcement agencies, and corporations across the world, with authoritarian regimes allegedly among them as revealed by WikiLeaks, Cointelegraph reported.
In response to that scandal, Brian Armstrong, co-founder, and CEO of Coinbase, announced that Neutrino staff with prior connections to the controversial software firm Hacking Team would transition out of their new roles at Coinbase.
However, the connection to Hacking Team is just scratching the surface. It turns out Hacking Team is also linked to a Saudi Unit linked to the death of a journalist Jamal Kashoggi who was killed in Saudi Arabia for unknown reasons, Quartz reported.
There’s more, in one of the more prominent incidents involving Hacking Team tools, UAE human rights activist Ahmed Mansoor was phished and monitored using the company’s tools. He was also physically attacked and is currently serving a 10-year prison sentence, both apparently in retribution for his fight against internet censorship in the Middle East.
The University of Toronto’s Citizen Lab even found that Hacking Team’s Remote Control System trojan software was used to monitor expatriate Ethiopian dissidents who operated a global news service. Ethiopia is one of the most repressive regimes in Africa, and the Committee to Protect Journalists has detailed extensive torture of journalists detained by the country’s leaders.
Reporters Without Borders even named Hacking Team as one of five “Corporate Enemies of the Internet.”
One Coinbase executive further revealed that the Neutrino purchase took place in response to a previous vendor’s disreputable decision to sell user data to third parties.
NSA Tracking Bitcoin For Years Under Project Oakstar
We know for several years the U.S. National Security Agency has been tracking cryptocurrency transactions, as revealed by NSA whistleblower Edward Snowden. NSA classified documents leaked by Snowden prove that the U.S. National Security Agency (NSA) has been keeping tabs on Bitcoin users globally through Project Oakstar, The Intercept reported.
One of the sub-projects within Oakstar was codenamed MonkeyRocket “the sole source of SIGDEV for the BITCOIN Targets,” the March 29, 2013 NSA report stated which tapped network equipment to gather data from the Middle East, Europe, South America, and Asia, according to the classified documents.
All this was made possible through the NSA’s ability to siphon traffic from the physical cable connections that form the Internet’s root DNS servers and potentially software that goes by the same name MoneyRocket. It seems that the U.S. government’s efforts haven’t been all that too successful having enlisted Coinbase’s analytics software to help track blockchain transactions.
But there seems to be more to the story. If you have been in crypto a long time you may remember years ago Coinbase was taken to court over several users by the IRS to gain information on customers who weren’t paying their taxes on their crypocurrency holdings. This in itself was another scandal that is widely remembered by the crypto community. The IRS revealed at the time, that only 802 customers of Coinbase, filed an 8949 form related to Bitcoin-related capital gains or losses in 2015.
Coinbase has also bowed to U.S. government demands in other ways blocking WikiLeaks from using its Shopify plugin for its own store. In other words, Coinbase has shown that it will bend to the U.S. government’s demands. This means that Neutrino which was acquired after Coinbase was forced to reveal thousands of its customer’s identities to the IRS, might have been bought in good faith to appease the U.S. government. As a means to say we will remain compliant to get out of the scrutiny of regulators and U.S. agencies by the (DCG) Digital Currency Group-owned company.
It’s also worth mentioning that both PayPal and Coinbase’s venture arms have backed cryptocurrency tax automation software, TaxBit, for the purpose of crypto taxation, as Bitboy Crypto reported.
It’s abundantly obvious that the emperor has no clothes and Coinbase is very clearly openly working with the U.S. government.
Bitcoin is currently trading at [FIAT: $47,757.23] DOWN -0.7% in the last 24 hours according to Coingecko at the time of this report.