Is it possible to trace fraud committed via a service the bridges banking and bitcoin?


Consider the following scenario:

  1. An individual, the "buyer" buys something online from someone else, the "seller". The buyer cannot verify the identity of the seller.

  2. The seller wants money upfront before shipping and communicates bank account details to the buyer. The buyer trusts the seller because he assumes the seller can be identified using via the banking details if the seller should attempt to defraud the buyer.

  3. However, the bank account is not a personal account in the seller's names. It's a service that will convert all incomming funds into bitcoin and sent them to a bitcoin address under the control of the seller.

  4. The seller runs away with the money (bitcoin) and never ships the goods. The buyer attempts to track the seller using the banking transaction and finds out about the service used. The service operator discloses the bitcoin address (e.g. when law enforcement gets involved), but cannot provide any further information about the seller.

Is is possible to track down the seller using publicly available information from the blockchain?


Posted 2013-01-19T17:48:50.320

Reputation: 19

Please ask a clearer question and point out how it is bitcoin-related. To my knowledge there exist no bank account that automatically converts incomming fiat money (wire transfers) into Bitcoin. Independent thereof, if a person "buyer" sends fiat money via wire transfer and finds himself defrauded, he wants to trace the wire transfer to the bank account owner ("scammer"). Whether the scammer walks away with gold, bitcoin or USD cash is irrelevant if the bank cannot identify him. – Jan – 2013-01-19T18:07:20.847

Im from another country, and here it is possible to buy bitcoins by transfering money directly from bank, using reference number/code. There is a company that does that. – user2657 – 2013-01-19T18:20:18.243

OK, I see, I have edited your question to make this clear. Hope this passes peer review. – Jan – 2013-01-19T19:11:05.663

Realistically, law enforcement probably wouldn't get involved. The operator of the Bitcoin service would be on the hook because the buyer would reverse the payment. Operators of Bitcoin services have had very little luck getting law enforcement involved when they get ripped off. (This is why such services don't exist. Scammers force them to raise their rates to cover fraud loss. That chases off legitimate users. And then the service's bank accounts get closed because of all the fraud. Game over.) – David Schwartz – 2013-01-23T07:26:41.357



It may be feasible to trace amounts sent to the scammer's address, but it would require a lot of work, mostly communication to strangers, to pin an identity to an address. This difficulty would be further exacerbated by the employment of green addresses, mixing services, or simple holding.

Bitcoin is pseudonymous, meaning that tracing is only as easy as the person being traced allows it to be.

Bitcoin is not fungible, meaning primary that a "coin" is not uniquely identifiable. Rather, it's a distributed leger system, with value being subtracted from one account and added to another in each transaction.

The only traceable entities are thus the accounts receiving and sending, and the only relation to the physical world in each transaction is an IP address. Given the employment of an anonymizing service such as TOR or a lower-anonymity proxy, tracing that IP address to a physical location with a person is highly improbable (if you figure out how, I'll bet you could make a lot of money from governments!)

If you're still up for it, BlockViewer may assist in the tracing.

As an aside, it's pretty safe to say that any BTC sent would require nearly Herculean effort to reacquire. It would most certainly necessitate the involvement of law enforcement, which has not likely yet been trained how to deal with digital currency investigations. This highlights the importance of a third-party escrow service or a personal relationship between the buyer and the seller.

Colin Dean

Posted 2013-01-19T17:48:50.320

Reputation: 6 834