In the ongoing case of United States v. Roman Sterlingov, where Sterlingov faces charges related to his alleged operation of Bitcoin mixer Bitcoin Fog, the United States District Court for the District of Columbia has allowed the use of expert testimony involving blockchain analysis software.

The court’s decision, issued on Thursday, February 29, 2024, addressed the admissibility of expert witnesses who will examine transaction records on the Bitcoin blockchain. Money transmission without a license, running a money transmitting business without a license, and conspiracy to launder money are among the charges against Sterlingov.

Expert witnesses for the prosecution, Luke Scholl from the FBI and Elizabeth Bisbee from Chainalysis, employed Chainalysis Reactor, a blockchain clustering software. This tool was utilized to group over 900,000 Bitcoin addresses associated with Bitcoin Fog and trace significant transactions amounting to billions of dollars between Bitcoin Fog and darknet markets such as AlphaBay and Evolution.

Despite objections from the defense, which labeled the analysis as “junk science,” the court deemed the use of Reactor as admissible. The defense raised concerns about the lack of peer-reviewed validation for Reactor’s clustering methods and the absence of error rate tracking by Chainalysis. However, the court found the software’s clustering to be reliable, utilizing established heuristics that have been prevalent in blockchain analysis since the inception of Bitcoin.

Reactor’s methodology includes analyzing co-spending, where multiple inputs in a transaction indicate control by the same entity, and identifying unique transaction patterns to attribute clusters to specific entities. While Reactor’s exact error rate is not monitored, the court highlighted the ability to cross-verify results with raw blockchain data.

The court emphasized that Reactor’s role in the case is supplementary, with the prosecution relying on additional evidence beyond blockchain analysis. The court ruled in favor of admitting the expert testimony based on Reactor under the Daubert standard, believing it will aid the jury in comprehending the complex blockchain transaction records.

Although the defense retains the right to challenge the software’s accuracy during trial proceedings, the court expressed confidence that the expert testimony will enhance the jury’s understanding of the extensive blockchain data involved. The trial against Sterlingov is anticipated to proceed in the following months.