A recent attempt by Inferno Drainer scammers to launder loot through Railgun faced an unlikely challenge.

The incident has received high praise from a prominent crypto security outfit.

The events highlight the growth and potential of crypto privacy tools.

The right to privacy has always been a core part of the crypto ethos, leading to the proliferation of several tools to help users obscure their identity or the origin of assets. While proponents have made several arguments for these tools—from just wanting to keep unwanted eyes out of their transactions to anonymous donations—their abuse by criminal elements has ensured they have come under fire from regulators in recent years.

As such, it was unsurprising to see eyebrows raised in April 2024 when Ethereum co-founder Vitalik Buterin endorsed Railgun, a crypto mixer known to be used by North Korean hackers, touting its ability to block bad actors. Three months later, a recent foiled money laundering attempt may have just proven the Ethereum co-founder right.

Access Denied

A recent attempt by Inferno Drainer scammers to launder loot through Railgun faced an unlikely challenge.  Sponsored

In an X post on Wednesday, July 10, MistTrack, the crypto tracking platform built by SlowMist, disclosed that Railgun had successfully foiled an attempt from an Inferno Drainer phishing scammer to launder 174 ETH worth over $550,000 at current rates through its platform. The blocked funds had been part of a 365 ETH worth over $1 million moved by the scammers on Tuesday, July 9. 

Congratulating the Railgun team for “outsmarting scammers,” MistTrack explained that the attackers were left with no choice but to withdraw the funds they had tried to obfuscate on the platform back to their wallet.

The recent foiled laundering exploit highlights the growth of crypto privacy tools and the effectiveness of Railgun’s privacy pool architecture to preserve privacy while preventing abuse by bad actors. 

How Railgun’s Privacy Pools Works

The privacy pools concept offers a way to separate illicit transactions from legitimate ones in a mixer by employing “association sets” and zero-knowledge proofs. Sponsored

Association sets divide pooled assets into subsets based on the legitimacy of their sources. To withdraw from the pool, users must submit a ZK proof that the funds are from legitimate sources, making it difficult for bad actors to use the service.

On the Flipside

While Railgun can block bad actors, they can not freeze the funds.

Before Railgun upgraded its protocol, North Korean hackers had used it to launder proceeds from the June 2022 Harmony Bridge hack.

Why This Matters

A key problem for crypto privacy tools is preserving privacy while still complying with money laundering rules. Railgun’s recent success in foiling the efforts of Inferno Drainer scammers suggests that this dilemma may now be a thing of the past.

Read this for more on Buterin’s Railgun endorsement:Buterin Endorses Railgun Despite Usage by North Korean Hackers

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