update 11 October 2021

US Navy Engineer Caught Selling Submarine Secrets for Cryptocurrency

Jonathan Toebbe – a US Navy Nuclear Engineer – was caught leaking secrets about nuclear submarines to an undercover FBI agent. Interestingly, the engineer was selling these secrets in exchange for cryptocurrency.

Selling Secrets for Crypto?

Details of the recent charges were released by the Justice Department on Sunday. Furthermore, the authorities accuse Toebbe and his wife for violating the Atomic Energy Act. Simply put, this law covers the regulation and disposal of nuclear materials in the United States.

After sending restricted data to an unidentified country last year, Toebbe sold nuclear submarine secrets for over $10k+ in crypto. Also, he sold them to whom he thought was a foreign official. But in reality, it was an undercover FBI agent. Lastly, the authorities have not indicated the specific cryptocurrency in the transaction.

The agent began by sending Toebbe $10k in the cryptocurrency as a “good faith” payment on June 8th, 2021. Later, Toebbe and his wife Diana traveled to a “dead drop” location in West Virginia to deliver secrets to the official. He hid an SD card with information about submarine nuclear reactors in a half-eaten peanut butter sandwich. After Toebbe returned the sandwich (with Diana on the lookout), the agent rewarded the pair with another $20k in crypto.

Later, Toebbe delivered another SD card at a dead drop location in Eastern Virginia. This time, he hid it in a chewing gum package. In return, he received a whopping $70k reward in cryptocurrency.

On October 9th, while traveling to another pre-arranged “dead drop” location, the FBI arrested the Toebbes.

Cryptocurrency and Crime

The Justice Department’s news release contains no indication of the specific crypto the Toebbes accepted. However, the asset class has frequently received critic for its facilitation of criminal activity.

Because payments in cryptocurrency are peer-to-peer, payments are un-censorable and irreversible. This way, it provides assurance to criminals that no third party can stop them from making their transactions.

However, cryptocurrencies come with disadvantages for criminals as well. Since cryptos operate upon blockchain technology, a publicly available ledger registers all transactions. Therefore, these ledgers can help track criminals sending or receiving illicit funds. Furthermore, this happens even if wallet identities are pseudonymous.

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However, many overestimate the amount of crime in the crypto. For instance, data from Cypher Trace shows that illegal activity accounts for less than 1% of all crypto transactions. Of those, the vast majority relates to scams and not the core technology.