Chainalysis Calls Bitcoin Developer “Incompetent”; understand the discussion

A legal battle in American courts seems more interesting than the long-awaited battle between Elon Musk and Mark Zuckerberg. In a document published last Friday (8), the blockchain analytics company states Chain analysis flame Bryan Bishopa Bitcoin developer, from “incompetent”.

To understand the discussion we have to go back to April 2021. On that date Roman Sterlingova Russian-Swedish citizen, was arrested at Los Angeles International Airport on charges of operating a cryptocurrency mixer called Bitcoin Fog.

According to US authorities, Bitcoin Fog processed more than 1.2 million bitcoins ($335 million, as of the transaction date) during its period of activity. According to the lawsuit, a large portion of these bitcoins are linked to fraud, drug trafficking and other crimes.

What seemed like another common case eventually turned into a nightmare for Chainalysis, the company that presented the evidence.

The MasterCard company comes to the suspect’s defense

The problems of Chain analysis started when the Number trailMasterCard’s blockchain analytics company, was called to defend the suspect and accept the case without charging anything.

In a 41-page document published in August this year, Ciphertrace makes strong allegations about Chainalysis’s analytics and states that they should not be used in this or any other case. Among the reasons cited are the following:

“This data has never been externally or independently verified, unaudited, uses new algorithms, is based on experimental research and […] There are no known error rates, false positive rates, false negative rates, or any scientific peer-reviewed research that validates the accuracy of Chainalysis’ application of its model data.”

Although they operate in the same industry, Ciphertrace points out one “Lack of data integrity” of its competitor, as well as a “lack of scientific validity”. Another point mentioned is that Ciphertrace did not have access to the Chainalysis Reactor tool to reconstruct the traces presented in the reports.

However, Ciphertrace notes that Chainalysis uses a Heuristic 2 (behavioral) model, which takes into account the types of addresses used and other details. “This raises serious questions about the claim that the Chainalysis Reactor is deterministic”the defense points out.

“There are discrepancy rates of over 60% between Ciphertrace and Chainalysis attribution data”continues Ciphertrace. “Ciphertrace does not use Heuristic 2 (behavioral) because it is inaccurate, error-prone and overly inclusive.”

“Chainalysis did not collect the data. I estimate there are hundreds of millions of data points that have not been verified.”

Elsewhere, Ciphertrace also accuses Chainalysis of manipulating data for the US IRS, generating compliant results.

“I understand that this means the trails were not lining up in a beneficial way, so Chainalysis offered to manually adjust their algorithm or data to create a more favorable trail for the IRS.”

Returning to the case of Bitcoin Fog, Ciphertrace points out that the Chainalysis model is “irresponsible”. The text continues and presents several shortcomings found in the competitor’s report.

“The shortcomings in the blockchain analysis in this case highlight some of the structural problems in this area”concludes Jonelle Still of Ciphertrace. “To prevent unfair arrests like this and compliance failures like FTX, it is recommended that Chainalysis and its blockchain analytics methodologies are independently audited.”

Defense asks Bitcoin developer to audit Chainalysis tool

In addition to Ciphertrace, the defense also resorted to Bryan Bishop, Bitcoin developer, to help with the case. Basically, she requests that Bishop have access to the Chainalysis Reactor, a tool used in the analyzes that led Roman Sterlingov to prison.

Chainalysis disagreed. In a document published last Friday (8), the analytics company calls the Bitcoin developer “disqualified” for such a service, arguing that he is not the appropriate person for the assessment.

“The person Defendant presents as his newest expert, Bryan Bishop, is not an expert at all, but rather an incompetent, biased, and apparently extreme biohacker whose current projects appear to involve genetic experiments rather than computer science projects.”

Elsewhere, Chainalysis highlights that Bishop has already publicly defended the use of mixers, the target of the lawsuit, and the developer has done so as well. “a huge incentive to abuse your access to Chainalysis”.

‘Bishop also claims to be a fast typist’emphasizes Chainalysis. “This is concerning if the intent is to put Bishop in a position to accurately copy the Chainalysis source code, whether he is qualified to analyze it or not.”

Ultimately, the suspect stayed out of the spotlight. After all, the developer of these arguments can have a significant impact on the entire cryptocurrency transaction analysis sector, being able to define the use of such tools in future cases.

Ciphertrace’s full defense is available to all interested parties. The same thing happens with the document that Chainalysis wrote about the Bitcoin developer.

Source: Live Coins

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