Geoff White
Appearances
Darknet Diaries
147: Tornado
So you've got this incredible whirlwind of sort of obsessive gamers and also obsessive cryptocurrency speculators coming in. And this game just went up and up in value. I think at one point it was valued at $2 billion, I think I might say. It's astonishing values. And the other thing that fed into this was COVID, it was lockdown.
Darknet Diaries
147: Tornado
So during that period, the game was big in Southeast Asia, particularly big in Southeast Asia, because that's where the company was headquartered. And it absolutely took off, particularly the Philippines. I think 40% of the players apparently were in the Philippines. And during lockdown... A lot of people lost work, weren't able to go to work, were looking around for alternative sources of income.
Darknet Diaries
147: Tornado
And they started to see that actually they could potentially play this video game and make money at it. So you put all these factors together and you just get this explosive combination that just launched Axie Infinity into the stratosphere. Much to the surprise, I think it's fair to say, of the guys at Sky Mavis who made it. I don't think they were expecting it to be such a big of a hit.
Darknet Diaries
147: Tornado
No. The way it would work, as I understand it, is your axes would become more and more valuable the more fights they won. And you could actually sell them to other people in the game. So you could say, you know, I've got this team of Axies. Look, they've got a fantastic track record of killing lots of other Axies. I don't know actually whether killing was part of it, but winning the battles.
Darknet Diaries
147: Tornado
You know, would you like to buy them off me? Also, there's a trade in smooth love potions. So as you played the game, you got more smooth love potion. You could sell the smooth love potion to people. You could buy and sell plots of land on Lunacia, which is the virtual... environment in which the game is played. So almost everything was for sale.
Darknet Diaries
147: Tornado
You can play on a browser. I think most people playing on a phone. It got so popular there were reports in the Philippines of people giving up their jobs just to play this game full time. Now, of course, as soon as that happens and hits the headlines, you get this rush of people who all think, oh, I'll do that. And of course, it became a pile on.
Darknet Diaries
147: Tornado
Inevitably, as soon as you start to make scads of money as a video game, somebody tries to hack you. And that's exactly what happened with Axie Infinity.
Darknet Diaries
147: Tornado
Ideally, what you want to do is you want to go to the source of all the money, the fount of all the money, which, you know, Sky Mavis has sort of serviced themselves. And so the hackers targeted one of the engineering team and...
Darknet Diaries
147: Tornado
carried out a very very elaborate or at least in my opinion very elaborate social engineering exercise on this person offered them a job now that's not an uncommon thing for you know crypto developers to get game developers get poached all the time and so they said look great job for you really big salary you know are you interested in talking to us and this employee said yes started receiving details of the job did apparently a couple of rounds of interviews for the job
Darknet Diaries
147: Tornado
which I presume was webcams off, but, you know, was interviewed by people for a job that seemed to exist. Of course, none of this was true. There was no job. This employee of Sky Mavis was being targeted by hackers who were trying to maneuver them to the point where they would effectively download malware.
Darknet Diaries
147: Tornado
making the whole story more believable i mean who gets job offers on discord anyway you know linkedin is the place to go get job offers the other thing you can do if you target someone in this way is you can say to them hey for this job we need to know that you can use this particular piece of software can you download it for us or can you click on this link and go to this private server so you can do this exercise as part of the job application
Darknet Diaries
147: Tornado
There's lots of ways with a job application that you can sort of trick someone into doing something they wouldn't necessarily have done. Downloading stuff, clicking on links. So I find that really, I think that was a really sort of smart way of operating. One for people to watch out for. Eventually, malware gets downloaded by this employee of Sky Mavis onto their work device.
Darknet Diaries
147: Tornado
Now, full disclosure, I don't think Sky Mavis have revealed how that specifically was done. But You can think of multiple ways whereby you'd be able to convince someone as part of the job application process to download something. There's lots of ways to do that. Effectively, the malware allowed the hackers access to Sky Mavis' computer systems.
Darknet Diaries
147: Tornado
And because they targeted an engineer who had what Sky Mavis describes as very deep level access, it wasn't like they hacked somebody in the HR department and had to work their way over to the development environment. They were already in. They'd hit the mother load effectively and were already in at a very deep level inside Sky Mavis.
Darknet Diaries
147: Tornado
With their deep-level access to SkyMaker's systems, the hackers start scoping out how Axie Infinity works and how this money is moving around.
Darknet Diaries
147: Tornado
And what they realize is what we've covered earlier is there's this internal blockchain within SkyMavis. Axie Infinity, monitoring the transactions between the players. There's the external sort of Ethereum blockchain, which is effectively bringing in money that people are, you know, Ethereum, Ether currency that people are spending into the game and then putting it out.
Darknet Diaries
147: Tornado
So there's a conduit through which this is all happening. And that conduit is a thing called the Ronin Bridge. The Ronin Bridge's job is basically, it's to reconcile what's going on in the game with what's going on in this external Ethereum blockchain. Effectively, the Ronin Bridge is nine computers around the world.
Darknet Diaries
147: Tornado
And those computers are looking at all the transactions inside and outside and reconciling the two ledgers together. So basically, the hackers realize very, very smartly, that's the pinch point. That's the conduit. That's where the money is going across. If they can control the Ronin Bridge, they can effectively control the flow of money.
Darknet Diaries
147: Tornado
And since there's millions and millions of dollars inside Axie Infinity, they can control that money. Now, the thing about this is there were nine computers as part of the bridge. It's effectively nine what they call validators.
Darknet Diaries
147: Tornado
And SkyMavis had sort of thought about the possibility of getting hacked to give them credit, and they only controlled four out of those nine, which isn't enough to give you majority control. So you can't just take over SkyMavis, get control of the bridge, and take the money out. The hackers had to find a fifth computer. So they have five out of nine, so they've got majority control.
Darknet Diaries
147: Tornado
And this is where things go wrong for Sky Mavis. Sky Mavis had outsourced the other five validator computers to external companies, so they weren't in control of them. So Sky Mavis didn't hold all the cards effectively. But one of the companies it outsourced to gave Sky Mavis a temporary access to its validator. And that temporary access was never revoked.
Darknet Diaries
147: Tornado
The hackers somehow managed to realize all of this and thought, aha, we've got four computers validating Sky Mavis. We need a fifth to get majority control. There's the fifth one. We've still got access to it via Sky Mavis. We've got five out of the nine computers. And guess what? We control the bridge. We control the money. And it's time to steal it.
Darknet Diaries
147: Tornado
They stole ETH currency and USDC, which at the time was valued at $625 million. $625 million. Yes. I'm trying to think, is there a single...
Darknet Diaries
147: Tornado
I'll go further than that. I've been a bit circumspect in the book, but I'm being less circumspect the more I go on. I think it's the biggest theft of all time. And I'm going to add a couple of qualifiers to that because that is a big statement to make. I'm talking about one-off theft. Obviously, ransomware as well, you know, has made billions over time, multiple victims.
Darknet Diaries
147: Tornado
I'm talking about one victim, one hit. At the time the theft happened, because obviously there's, you know, the Bitfinex hack, you know, the one that Heather Morgan and Illy Lichtenstein got sentenced for. Well, that was, I mean, that ended up being $3 billion, I think. But at the time of the hack, it was $70 million.
Darknet Diaries
147: Tornado
So I'm talking about valuing a crime at the time the crime was committed, one-off crime, one-victim crime. And so I've been doing, you know, you Google and you Google and you try and find these things. And, you know, there's the Isabella Stewart Garden Museum heist is one of them. So that was, I think, 93, was it? They broke into the museum, they stole artworks.
Darknet Diaries
147: Tornado
The artworks were valued at 500 million. Now that's often listed as being one of the most, you know, expensive heists of all time. That's only 500 million. So I know I'm out on a limb here, but I do think it's a serious, if it's not the number one, it's a very serious contender for biggest theft of all time based on one hack, one victim, one crime, one victim valued at the time of the crime.
Darknet Diaries
147: Tornado
Yeah, it may start off in crypto and you may turn your nose up at that, but it ends up in hard dollars and hard dollars that can be used to fund criminal activity. and some very serious, as we're going to talk about, some very serious criminal activity.
Darknet Diaries
147: Tornado
Good question. I mean, obviously, it very quickly hit the news that this had happened. And in fairness, Sky Mavis did a sort of rolling blog on what had happened and were filling people in. And of course...
Darknet Diaries
147: Tornado
Because it's cryptocurrency and because all cryptocurrency moves across a blockchain, which is almost always publicly available, and particularly when the hackers transferred the money out from Sky Mavis, it was publicly viewable. People start looking at the wallet addresses to which the money is being sent. They start looking at the methodology behind the hack.
Darknet Diaries
147: Tornado
No, that we know of. It's certainly very rare for nation state hackers to be put on the send for money. Of course, North Korea is in this unique situation. North Korea is unique for a lot of reasons, but... The unique situation that they are under international financial sanctions have been for a very long time, have, it seems, largely run out of money or run out of legitimate sources of money.
Darknet Diaries
147: Tornado
And so the accusation is that North Korea's computer hackers are tasked with gaining currency by any means necessary. And that's, from what we know of North Korea, not unusual. Its diplomats historically have been tasked with not just being diplomats, but, you know, can you also make a bit of money on the side, please?
Darknet Diaries
147: Tornado
When you steal cryptocurrency, one of the hazards of this is it's inevitably going to be on a blockchain somewhere, and that's almost inevitably going to be public. And so it's almost like you've gone into the bank and stolen a whole bunch of banknotes, but they're all... fluorescent yellow. And people can see in your pocket that you've got these banknotes.
Darknet Diaries
147: Tornado
So your key task as a cryptocurrency thief is to launder the money. And that's why I've written a book about money laundering.
Darknet Diaries
147: Tornado
That's a very good point. One of the things that people have spoken about is the idea of North Korea sort of setting up a cryptocurrency exchange. I guess the answer to that would probably be, Firstly, there's this idea, I think, with all these thefts that are attributed to North Korea, that North Korea gets the money back to Pyongyang, and that's where its destination is.
Darknet Diaries
147: Tornado
Well, there's nothing to buy in Pyongyang. There's no point sending it there. Yes, you could set up a cryptocurrency exchange in Pyongyang, send all the cryptocurrency there, withdraw it in, I think it's still Won is the currency they use, but then you've got North Korean currency in North Korea. What are you going to buy? What was the point of that?
Darknet Diaries
147: Tornado
What you want is to ship the money to, I don't know, you want to buy widgets in Frankfurt, ball bearings in Frankfurt. You want to pay somebody off in Brazil. You want to get hold of missile technology secrets in Afghanistan. You want the money mobile. You want it flexible. So you want to be able to move it around. And also, $625 million is a huge quantity of money.
Darknet Diaries
147: Tornado
You've got to take it somewhere where there's enough liquidity that somebody will buy that cryptocurrency off you in exchange for cash. Well, fiat money, dollars, pounds, yen, whatever. And so this was the challenge that North Korea was faced with, if indeed it was they behind the hack.
Darknet Diaries
147: Tornado
that they were trying to take this money somewhere that could absorb it and turn it around and give it back to them in cold, hard currency.
Darknet Diaries
147: Tornado
By this point, the wallets into which the crypto had been transferred, the stolen money from Axie had been transferred into crypto wallets. And those wallets were flagged as being recipients of crime.
Darknet Diaries
147: Tornado
And the law enforcement had acted quite quickly and gone around to the major exchanges, the big legitimate crypto exchanges, and said, hey, if anybody tries to transfer you money from that wallet there, don't take it because it was stolen from Axie. And so they tried, I think, $60 million worth of exchanges, the hackers, at legitimate sort of above the line, above the board exchanges.
Darknet Diaries
147: Tornado
And that money all got frozen because, of course, as soon as the exchanges received the money, they went, oh, this is the stolen Axie money. Yeah, we're keeping this. And so the hackers lost tens of millions of the stolen money because they tried to pump it through the legitimate system. And the legitimate system just froze it. So then they needed to find somewhere else.
Darknet Diaries
147: Tornado
Where can you go with hundreds of millions of dollars of stolen crypto? And just put it in, no questions asked. And that's what led them to Tornado Cash.
Darknet Diaries
147: Tornado
As this story sort of emerged, one of the people who'd used this particular mixer was Vitalik Buterin, who, of course, came up with the Ethereum protocol, I think co-developed it. And he said, look, this is exactly what I did. I wanted to donate to Ukraine. I didn't want to do it publicly. And that is the hazard of using crypto is it is public.
Darknet Diaries
147: Tornado
So I used a mixer because I want to preserve my privacy. There are good privacy-preserving reasons to use something like Tornado Cash. And that's, I suspect, the reason Tornado Cash was set up largely was for those privacy-preserving reasons.
Darknet Diaries
147: Tornado
You've understood exactly, that's precisely what it is. At least that's what the claim was from inside Tornado Cash. As we'll talk about later on, others have cast a lot of doubt on that. But certainly that was the claim. Look, Tornado Cash is this headless organization. And once you use it, you're effectively using an automated machine.
Darknet Diaries
147: Tornado
It's like going up to a vending machine, sticking your money in, getting the can out. And the vending machine has been forgotten by whichever company was meant to own it. It just runs on its own.
Darknet Diaries
147: Tornado
Now, this has obviously presented a lot of problems for particularly the United States government because they can see that money's gone from the stolen, the money's gone from Axie Infinity, been stolen, sent to Tornado Cash. They believe it's North Korea behind this. But, like, who do you prosecute? There's nobody behind Tornado Cash at this time. That's what they thought.
Darknet Diaries
147: Tornado
So it's like, what do we sort of do about this? So they did the next best thing, the U.S. government. They put Tornado Cash under sanctions. And Basie said, look, this mixer, this Tornado Cash mixer is working for the North Koreans, we believe, we claim.
Darknet Diaries
147: Tornado
And therefore, anybody who interacts with this mixer and sends money to it or receives money from anybody who interacts, who's in the US, people, organizations, doesn't matter, they are breaching sanctions as well. We can't shut Tornado Cash down, but we can freeze it out by saying, you cannot interact with anybody in the US anymore.
Darknet Diaries
147: Tornado
And anybody in the US who interacts with Tornado Cash, you've committed an offense and we can come after you.
Darknet Diaries
147: Tornado
Yes, three people, it seems, created it. They are Andrei Pertsev, Roman Storm, and Roman Seminov. They worked for a company called PeperSec. And I think it's, as we'll get into, there's some legal proceedings around this that we have to be quite careful about. But I think it's fairly uncontroversial that they set up PeperSec and they created Tornado Cash.
Darknet Diaries
147: Tornado
But the key thing is they created it, they say, to preserve privacy. And having created it, they got to a certain stage and said, okay, we now burn our passwords to this. We step back. We have nothing more to do with this. It's running on its own, the Tornado Cash DAO.
Darknet Diaries
147: Tornado
And, well, there's two sides to this. You can go on the back of what they said and what their defenders say, which is this was a privacy-preserving tool. The intention was never to enable money laundering. However, the counter-argument from the authorities, which they're making very strongly and in court, is it doesn't matter.
Darknet Diaries
147: Tornado
If you're going to run a money-transmitting business that's dealing with, as Tornado Cash was, hundreds of millions of dollars, you are obliged to think about money laundering. You can't just naively set the thing up and hope no criminals are going to use it. That's not how it works, buddy, you know. You have to obey money laundering laws. So we've got arguments on both sides.
Darknet Diaries
147: Tornado
We've got arguments the intention was never there. We've got the argument on the other side saying it doesn't matter. You're on the hook for this if you set up these businesses. As you can tell, I'm being diplomatic about this. A, because there's legal procedures about it. B, also because I hear both sides. I do genuinely hear both sides. And that's the thing. It's a fascinating debate.
Darknet Diaries
147: Tornado
If you do 100% privacy, you have to protect people you don't like as well. It's a fascinating debate. This is why it goes round and round in my head in the same way it sounds like it's going in yours as well.
Darknet Diaries
147: Tornado
Which was exactly the basis on which the crypto campaigners sued the United States Treasury and Janet Yellen individually after the sanctioning of Tornado Cash. This decision to sanction Tornado Cash went down very, very badly with large swathes of the crypto community, has to be said, for exactly the reasons you've outlined.
Darknet Diaries
147: Tornado
One of the key arguments and a fascinating argument is, to what extent are you responsible for the downstream effects of code that you create and make available? The people who saw this decision by the US Treasury to sanction Tornado Cash said, well, you can't sanction code. You can sanction the person who misuses the code. You don't
Darknet Diaries
147: Tornado
if somebody gets stabbed, you don't prosecute the person who made the knife, you prosecute the person who did the stabbing. And so that was the argument on which the US Treasury, one of the arguments on which the US Treasury was being sued. The other line of argument was that code, as you said, is freedom of speech, and freedom of speech is constitutionally protected.
Darknet Diaries
147: Tornado
Those cases, by the way, that the attempts to sue the Treasury over its decision on Tornado Cash got rejected, have not done well, but are being appealed as far as I'm aware at the moment. So they lost in the first at least one round, maybe two rounds, but they're continuing that campaign because they argue exactly the same as you're saying, which is This is code. You don't prosecute code.
Darknet Diaries
147: Tornado
Because if you do, you dampen freedom of speech. You stop people inventing code. There's a chilling effect. That's the risk here. And that argument is still playing out in the courts.
Darknet Diaries
147: Tornado
You are clearly not the only person who feels this, because in the wake of the U.S. government sanctioning Tornado Cash... Somebody clearly felt even more, felt very concerned by this and very put out by it and thought the whole thing was ridiculous, this idea of sanctioning. And so they set up a stunt, which is another bizarre wrinkle to this story and an intriguing one.
Darknet Diaries
147: Tornado
So the thing about Tornado Cash is, even though the US government sanctioned it, it's still up and running. You can still use its code on the internet. The website went down, but that doesn't matter because the protocol, you can still send money to the protocol effectively and it will do what it's programmed to do and effectively mix the money and anonymize the money.
Darknet Diaries
147: Tornado
So the thing about that is, if I know, Jack, your Ethereum wallet address, I can use Tornado Cash to send you money and there's nothing you can do about it. It just gets sent to you automatically. So someone somewhere, we still know who did this, and I'm waiting for the day actually, Jack, when they turn up on your podcast.
Darknet Diaries
147: Tornado
Somebody took $50,000 and started randomly sending it in tiny bits, tiny, tiny amounts to anybody who was famous who had an Ethereum wallet, including Jimmy Fallon, the comedian Jimmy Fallon, Shaquille O'Neal, basketball star Shaquille O'Neal. they started receiving. And of course, it shows up on the blockchain.
Darknet Diaries
147: Tornado
You can't hide it because you see Shaquille O'Neal's address and you can see it's received money from Tornado Cash. That's all logged. And so technically, technically, I guess you could argue Jimmy Fallon and Shaquille O'Neal have breached sanctions or sanctions dodging. And I guess you've could say they should be prosecuted for that.
Darknet Diaries
147: Tornado
But the whole point of this exercise was to show how ridiculous it was that anybody, even famous people who've done clearly nothing wrong, can then, as a result of this sanctioning of Tornado Cash, get implicated in sanctions busting. The idea was just to illuminate how ridiculous this was. And so I don't know what Jimmy Fallon and Shaquille O'Neal have done about that, but it's tricky.
Darknet Diaries
147: Tornado
There's cryptocurrency tracing companies who claim they left it in for about four weeks and then extricated it. What we don't know, of course, is who it went to thereafter. So you can, with mixers, I mean, particularly when you're mixing a huge amount like $450 million, There are companies that track crypto.
Darknet Diaries
147: Tornado
One of the things they do with mixes is they look at the amount going in, the amount going out. Now, you can't link, you know, this cryptocurrency payment is linked to that one going out. But you can see the volume and you can see the amounts going in, the amounts going out. And so I think that's what they've done is they've looked and gone, look, 450 million goes in.
Darknet Diaries
147: Tornado
We can look at the outflows and sure enough, four weeks later, you know, 450 million comes out to put it in very simple terms. And so that money is now somewhere in cryptocurrency wallets. The other interesting thing is, well, then who do you take that to, to cash out? You've got to say to somebody, right, you know, here's, here's $450 million, which came from Tornado Cash, don't know where else.
Darknet Diaries
147: Tornado
Could you transfer that and change it into pounds or dollars or yuan or whatever to There are people out there who'll do that, no questions asked, that they'll take a big cut. But doing that to $450 million, you've got to have some brokers that have got some serious, serious liquidity on their hands to be able to change that.
Darknet Diaries
147: Tornado
So the theory, I think, from some people is that there's a bit of a glut now of stolen money that the North Koreans are accused of stealing, that they're trying to cash out, but they can't cash out quickly enough. There's nobody can, you know, who can buy it off them for the $450 million or whatever they need. So that's where that's ended up, all that money.
Darknet Diaries
147: Tornado
Yeah, exactly. So ideally you want a chop shop that can convert your big yellow bus into a bunch of tiny little smart cars or whatever. Just going back as well, this idea that Tornado Cash was sort of leaderless is now being thoroughly challenged in the courts.
Darknet Diaries
147: Tornado
The first thing that happened was a guy called Andrei Pertsev was arrested in Holland and accused by the Dutch government of running Tornado Cash. Roman Semenov is also indicted by the US government. He's believed to be in the Russian Federation, so hasn't faced trial. I've tried to contact Roman Semenov, hadn't heard back from him.
Darknet Diaries
147: Tornado
Subsequently, after the sanctioning of Tornado Cash, the US government charged Roman Storm, who's in the US and is, I think, currently being tried and is in prison. Again, fascinating trial. The same arguments are coming up in his trial as we've talked about, you know, people saying, look, he did not run this. He was trying to preserve privacy. That's why he set it up.
Darknet Diaries
147: Tornado
Now, going against the idea that these guys didn't run, inverted commas, Tornado Cash, is a slightly inconvenient fact, which is that, according to the US government, they owned a lot of the voting tokens and crypto tokens inside Tornado Cash. So the way this works is... you know, Tornado Cash is leaderless. It's done by vote. Any changes to Tornado Cash get done by vote using tokens.
Darknet Diaries
147: Tornado
I think part of the US government's argument is, well, hang on, a lot of those tokens were in the hands of these three individuals. So they may say they didn't have control, but actually we think they did. Also, they say that they were still making money out of Tornado Cash. And so all this leads to trying to knock down this argument the defendants have, which is that, oh, we didn't run it.
Darknet Diaries
147: Tornado
The U.S. government is saying, no, you did run it, and here's the evidence why.
Darknet Diaries
147: Tornado
What's fascinating about this, it sort of starts with a hack on a video game to do with salamanders, and it ends up in this kind of epic battle royale over freedom of speech and privacy. And yeah, I find it really, really fascinating. It's almost like the kaleidoscopic story. You look into it, it's got everything in it.
Darknet Diaries
147: Tornado
The worst example you could possibly think of, maybe with the exception of child sexual abuse, one of the worst examples you could think of would be a country using this kind of technology to get nukes. I was like, oh, yes, we've got that. So it's almost like your privacy-defending hat, your privacy-defending head is being put to the most extreme test. It's like, you want privacy? Right.
Darknet Diaries
147: Tornado
What about North Korean nukes? It's almost like that's immediately what's happened. You know when you're arguing with somebody and they just go to the most extreme example of comparing you to Hitler or whatever? It's like that's happened. Now it's North Korea. What are you going to say now? It's, yeah, fascinating. Genuinely fascinating.
Darknet Diaries
147: Tornado
It's gone down. Don't get me wrong, the amount it's processing has gone down. And therefore, it makes a less efficient mixer. You want your mixer to have lots of liquidity, lots of volume going through. The less it's used, the less efficient of a mixer it's going to be. However, it is now a criminal mixer. And so, you know, it's a sanctioned mixer, according to the US government.
Darknet Diaries
147: Tornado
And so anybody who uses it is going to be a crook. What that means, of course, is... if you use Tornado Cash, you're going to really struggle to send the money onwards. Because whoever sees money coming at them from Tornado Cash is going to go, no way I'm going to accept that.
Darknet Diaries
147: Tornado
Unless it's somebody who doesn't care about dealing with sanctioned entities, in which case, you know, you're in a sort of slightly murky world.
Darknet Diaries
147: Tornado
Yeah. Yes, Roman Storm is based in the U.S., but actually at the point where they sanctioned it, I don't think that had been confirmed. And look, with sanctioning, sanctioning is a really interesting power in that basically any time money transfers across the U.S., the U.S. can exert control in terms of sanctions. So it's extremely difficult to avoid if the U.S.
Darknet Diaries
147: Tornado
government wants to go after you on sanctions. You know, it's extremely difficult to avoid that. The U.S. government's argument is that there would be U.S. users using this service... money transactions would have gone across the U.S. territory. Also, as far as I'm aware, the sanctions dodging accusations that the U.S. puts at the foot of North Korea gives the U.S.
Darknet Diaries
147: Tornado
government huge scope to go after it around the world. Wherever North Korea tries to dodge sanctions, it seems the U.S. government can go with its sanctions legislation. It seems odd, but in a way, it doesn't surprise me at one jot that the U.S. has managed to try and do this.
Darknet Diaries
147: Tornado
But this is why sanctions are such a useful weapon and why the U.S. is resorting to them more and more. We've had Bitcoin fog. There was a prosecution in that case recently, another crypto mixer. This is why the U.S. government is using them. We can't nick these people. We can't lock them up and put them in handcuffs most of the time. We can use financial, frankly, financial warfare
Darknet Diaries
147: Tornado
This is what we do now. Financial warfare? We can't police the code. We can't police the people. But it's all about money. So we are just going to use that sanctions power, which is a really big, broad power to use. As soon as I started seeing this and I started realizing what was going on, I said, oh, that makes perfect sense. You know, you've got so few weapons to bring to the battle.
Darknet Diaries
147: Tornado
But you've got this weapon and it's really good and you can use it wherever.
Darknet Diaries
147: Tornado
Very good question. And that comes down to how much liability the exchange has. So in the situation you described there, that's what, four hops? Yes. I think, given that cryptocurrency tracing is fairly well developed, I think the authorities would say, well, hang on, you should still have known it came from that.
Darknet Diaries
147: Tornado
But if you're talking about 100 hops or 1,000 hops, maybe that's enough hops that the authorities say, well, yes, you had no way of knowing this back in the day.
Darknet Diaries
147: Tornado
Now you're thinking like a money launderer, Jack. That's what I hoped we'd get in this conversation. You finally, that's what the book's about.
Darknet Diaries
147: Tornado
Hi, I'm Jeff White. I'm an author and investigative journalist, and I cover organized crime and technology. Yeah, so Axie Infinity is not like the games that I used to play when I was a kid, where they sell you the video game and then you go away and you play it and that's it.
Darknet Diaries
147: Tornado
Axie's an online game, as of course lots of them are, and you're playing against other people online, which of course lots of games are. But the thing that made Axie different and quite radical, I think, for some people was that it Everything in the game was basically for sale. It was a whole marketplace. So the way it worked was you have these axes, which are based on the axolotl salamander.
Darknet Diaries
147: Tornado
You have a team of axes, three axes, and you basically wrestle them. You fight them against your opponent's team of axes. And if you win... you're rewarded with smooth love potion tokens, which you can use to breed your Axies together to get them to be better fighting machines. It's basically a bit like, do you remember those Tamagotchi keyring things? Yeah, I do.
Darknet Diaries
147: Tornado
Exactly that. It's like that mixed with WWF wrestling. So that's the idea, actually. This game is hugely, hugely popular.
Darknet Diaries
147: Tornado
You buy. You have to buy the team. And you can't, as far as I'm aware, get one. You have to buy a team of three, because three is the magic number. In order to do this, and this is where it gets interesting with the sort of cryptocurrency aspect to it,
Darknet Diaries
147: Tornado
If you have, I'm assuming it's dollars for you, Jack, you can swap your dollars into ETH, the currency on the Ethereum blockchain, the cryptocurrency. It's a bit like Bitcoin. Actually, it's number two, I think, to Bitcoin, ETH, I think I might say. You can then take that Ethereum money and you can put it into, transfer it into Axie Infinity.
Darknet Diaries
147: Tornado
And then you can use that in-game currency to buy your Axies, to buy Smooth Love Potion. You can buy land in the game. So it's all, the whole game is based on cryptocurrency. Yeah. And this is an internal blockchain within the game that tracks who owns what and who's sold what to whom.
Darknet Diaries
147: Tornado
Axie Infinity was created by a company called Sky Mavis, who are headquartered in Vietnam. I think the company's registered, though, in Singapore. And this was five guys who'd been part of the sort of esports scene, so they'd been around gaming for a very long time. And the idea of sort of crypto-based video games... It wasn't sort of radically new.
Darknet Diaries
147: Tornado
I think CryptoKitties predates Axie Infinity from what I've read of it. But basically what they did was they built this game and released it. And in a way, they locked out because they obviously got the benefits of video game obsession. People became obsessed with this game and started playing it and battling their Axies together and so on.
Darknet Diaries
147: Tornado
They also got the benefit of a sort of cryptocurrency boom because this was sort of 2019, 2020, and crypto was starting to rise in value quite steeply at that point. So... people who were into video gaming got into Axie Infinity.
Darknet Diaries
147: Tornado
But what was really interesting around the discussion boards around Axie Infinity is you start to see this change where people are discussing the game and then they start to discuss crypto investments and crypto speculation. So suddenly people who are into crypto and the speculative side of it started to see this game as an opportunity, a money-making opportunity.