A history of Bitcoin Fog, the crypto mixer that washed 6% of BTC's supply

After a two-year investigation, authorities have tied 32-year-old Russian-Swedish national Roman Sterlingov to the pseudonym Akemashite Omedetou — the face of now defunct crypto mixer Bitcoin Fog.

The platform was popular with Silk Road users and laundered over 1.2 million BTC over the past decade (worth $336 million at the time but over $69 billion today).

Police arrested Sterlingov last week and detailed how they unravelled Bitcoin Fog in an affidavit.

But how did Sterlingov grow Bitcoin Fog into an influential platform that churned over 6% of Bitcoin’s circulating supply?

As it turns out, much of it happened on Satoshi Nakamoto’s Bitcoin forum, BitcoinTalk.

Under the name Akemashite Omedetou (“Happy New Year” in Japanese), Sterlingov sent 84 posts between 2011 and 2016. Here’s what they reveal about the history of Bitcoin Fog:

Humble beginnings

In 2011, Bitcoin Fog was announced on BitcoinTalk. The post promised to provide full anonymity by mixing everyone’s BTC into a pool and allowing scheduled withdrawals in randomized amounts at randomized intervals.

The post garnered a dozen replies within a day, and eventually picked up enough steam to create an online community that Sterlingov (aka Omedetou) regularly engaged with.

The first post by Bitcoin Fog founder Roman Sterlingov on BitcoinTalk, an online forum. — Roman Sterlingov was 22 years old when Akemashite Omedetou announced Bitcoin Fog.

The BitcoinTalk post served as one of Bitcoin Fog’s only public comms outlets over the next five years — a marketing tool, news source, and online discussion for its users.

While an unusual strategy, Sterlingov likely minimized channels to fly under the radar.

Things were looking good on BitcoinTalk, with Omedetou’s first posts focused on gaining customer trust and loyalty (standard goals for Bitcoin mixers starting out in 2011).

Sterlingov listened to their users. Omedetou’s early interactions show suggestions for improvements — like using checksums to automatically detect wallet address validity — were taken onboard.

A post by Bitcoin Fog founder Roman Sterlingov on BitcoinTalk, an online forum. — Akemashite Omedetou replied to almost every post in the start, building customer trust and winning over the internet.

Although, many comments came from disgruntled customers unable to login due to temporary outages.

Bugs, crashes, and requests for help with lost private keys would serve as constant headaches for Sterlingov — but certainly not the biggest.

Warnings from the crowd

By February 2012 (a year after its launch), Sterlingov posted Bitcoin Fog already handled 150 to 200 BTC per day ($1,000 then, $10 million today).

Only, with great churn comes great responsibility. Customers were frustrated with the lack of public updates on downtime, which became more frequent as its user base expanded:

“It looks like the problem hasn’t been really solved,” said one Bitcoin Fog user. “My two payments don’t show up again and it’s been over 12 hours and almost 100 confirmations. Anyone else having the same issue?”

Users would often follow up their complaints with a post stating their money eventually turned up. Sterlingov replied to the backlash anyway, claiming real-time site outages could be linked to real-world events and therefore make it easier for authorities to track their location.

But overall, Bitcoin Fog’s founder appeared steadfast in the belief they wouldn’t get caught. When users suggested an inability to run Bitcoin Fog, Sterlingov clapped back.

Sterlingov claimed that considering no Bitcoin had been “lost” (presumably to fraud or law enforcement), the service was operating as usual.

And as Sterlingov stated in 2012, “there hasn’t been any real Bitcoin-related conviction yet anywhere in the world” — so everything must be fine. ^{*foreshadowing*}

O-kuyami mōshiagemasu (I offer my condolences)

Bitcoin Fog chugged along for years despite the hate, albeit with slightly less enthusiasm in Omedetou’s replies.

But as Bitcoin Fog matured and gained more users, Sterlingov stopped using BitcoinTalk for community building, and instead mostly dealt with scammers attempting to access other users’ funds.

It’s interesting to note the change in Omedetou’s tone over the years. From overly polite replies in 2011, conversations devolve into thinly-veiled impatience by his last post in 2016.

A forum post written in an unfriendly way. — “Have a shitty new year, actually.” – Akemashite Omedetou, 2014.

At that point, one can only assume BitcoinTalk was no longer a fruitful platform for discussion. After 2016, Sterlingov turned to private customer service to communicate with users.

Omedetou’s absence from the forum was soon replaced by his competitors. Many claimed it was a sign of untrustworthiness if the creator was no longer responding.

But from browsing mixer review sites, it appears that Bitcoin Fog was relatively well received up until Sterlingov’s arrest in LA last week.

A competitor called Chipmixer made fake accounts to discredit Bitcoin Fog. — Chipmixer, a large competitor, recently swooped in. The account “djeeperz” was created 3 minutes before its first post on the thread, claiming lost funds.

In retrospect, Sterlingov’s fall from grace casts an interesting perspective on Omedetou’s BitcoinTalk archive.

Perhaps critics had a point back in 2012 for suggesting Sterlingov was unfit to run Bitcoin Fog. After all, authorities caught them in a simple ‘follow the money’ investigation that touched their BitcoinTalk account.

Undoubtedly, the forum sheds light on how a Bitcoin laundering powerhouse came to be — at least until the cops arrived.