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Coinbase says it was not involved in the DOJ’s Bitcoin ransom seizure

Coinbase CSO says ‘good ol’ fashioned police work’ landed the FBI the private keys.

Coinbase’s Chief Security Officer has refuted suggestions the U.S. crypto exchange was involved in any seizure of crypto assets related to recent Colonial Pipeline ransomware attack.

CSO Philip Martin took to Twitter on June 8 to explain the firm’s involvement, or lack of it, with the Department of Justice warrant for the seizure of Bitcoin.

The official seizure story, in which government officials recovered 63.7 BTC, worth roughly $2.3 million at the time, had a number of irregularities. Federal investigators claimed to have obtained the Darkside group’s private keys but did not disclose how the FBI was able to commandeer them.

According to the affidavit, the private key for the subject address was in the possession of the FBI in the Northern District of California. This led to the connection with Coinbase which has servers in the area as a number of Twitter users pointed out. Martin refuted these claims stating:

He added that due to the exchange’s storage mechanisms which use a pooled hot wallet, it “wouldn’t make a ton of sense” to hand over a specific private key.

Questioning how the investigators acquired the private key he guessed that it was “some good ol’ fashioned police work to locate the target servers,” followed by a mutual legal assistance treaty (MLAT) request and/or some political pressure to get access.

Concerns arose over the abilities of authorities to access the cryptographic keys which played a role in yesterday’s market drop. However authorities have a variety of innovative ways to access private information. On the same day, reports surfaced detailing a fake encrypted communications app used by criminals that was secretly operated by the FBI in order to surreptitiously collect messages, private information, and monitor criminal activity on a massive scale.

In a newsletter on June 8, the founder of Quantum Economics and a former Senior Market Analyst at eToro Mati Greenspan, stated that the recovered ransom was actually bullish for Bitcoin as many had expected U.S. politicians to use crypto as a scapegoat for the attack and to enforce some heavy-handed regulations.

Greenspan added that the “only valid explanation for prices to be falling is that markets are random, especially in the short-term.” At the time of writing, BTC was trading down 2.2% over the past 24 hours at $33,000 after slumping over 10% since the beginning of the week.

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