BitGrail Nano

The BitGrail Nano hack of 2018 exemplifies NANO cryptocurrency’s vulnerability to money laundering in Italy and the United States, where operator Francesco Firano allegedly exploited the block-lattice’s asynchronous transactions to siphon 17 million XRB (~€120M), layering funds through unhosted wallets to evade AMLD5 tracing and IRS tax enforcement. Italian Postal Police charged Firano with fraud and laundering in 2020, while U.S. class actions targeted promoters for enabling P2P scam vectors, highlighting NANO’s feeless design as a magnet for European scams and unreported gains—despite no PEP ties, the case spurred asset freezes, VASP reporting mandates, and J5 warnings on privacy-enhanced cryptos.

In 2018, Italian exchange BitGrail suffered a massive hack, losing 17 million Nano (XRB) coins valued at ~$146M (€120M), allegedly orchestrated by operator Francesco Firano (“The Bomber”) through exploits in Nano’s block-lattice architecture. This feeless design enabled asynchronous duplications from the hot wallet, followed by rapid P2P layering via unhosted wallets, evading sequential tracing popular in European scams. Italian Postal Police charged Firano in 2020 with fraud, bankruptcy, and money laundering under AMLD5, while Florence courts ruled Nano as “property” for asset freezes. U.S. investors filed SDNY class actions against promoters for securities fraud and unreported gains, drawing IRS scrutiny on peel-chain tax evasion vectors. No PEPs involved; Nano Foundation provided $1M victim aid. The case underscores Nano’s high AML risk, prompting J5 taskforce warnings on privacy coins.

Countries Involved

Italy, United States

Date Discovered / Reported

The incident surfaced on February 8, 2018, when BitGrail announced the loss of approximately 17 million Nano (XRB) coins; Italian postal police formally reported suspicions against the exchange operator on December 21, 2020, after extensive investigation.

Cryptocurrency Involved

Nano (XRB)

Type of Crime

Computer fraud, fraudulent bankruptcy, and money laundering. In Italy, the exchange operator allegedly orchestrated or enabled the theft of user funds, then laundered proceeds through repeated unauthorized withdrawals exploiting Nano’s non-idempotent node vulnerabilities, evading detection via parallel account chains. U.S. connections emerged through victim class actions alleging conspiracy in promotion and failure to disclose risks, with laundered funds potentially converted via international exchanges, implicating tax evasion vectors as IRS scrutiny on privacy coins intensified.

Entities Involved

Primary: BitGrail SRL (Italian exchange), Francesco Firano (aka “The Bomber,” 34-year-old Florence resident and sole proprietor). Nano Foundation developers faced accusations but denied involvement. U.S. ties via class-action lawsuits (e.g., Fabian v. Nano defendants in Southern District of New York) involving U.S. investors and promoters; over 230,000 global victims, including Americans, pursued claims. Italian authorities (Postal Police, CNAIPIC cyber unit) led probes, while U.S. courts froze related assets.

PEP Involvement

No. No politically exposed persons (PEPs) identified; perpetrators were private operators and developers without public office ties, focusing scam on retail P2P traders in Europe and U.S. markets.

Laundering Techniques Used

Exploit of Nano’s block-lattice: Operator allegedly sent multiple withdrawal requests to vulnerable nodes, duplicating transactions without idempotence checks, siphoning 17M Nano (~€120M/$170M peak). Funds layered via rapid P2P transfers across unhosted wallets, evading AMLD5 tracing; Italian enforcers flagged conversions to fiat. U.S. angle involved peel chains dispersing to mixers, off-ramping to USD via exchanges like Mercatox, complicating IRS John Doe summons. Feeless nature enabled micro-transactions for obfuscation, popular in European scams per J5 reports.

Estimated Value Laundered

€120 million (~$146M at reporting), equivalent to 17 million Nano stolen; post-crash value ~$132M. Italian court valued unreturned Nano at €9.7M+ countervalue, with exchange holding €16M+ in remaining assets (Bitcoin/Nano), deemed insufficient for restitution amid laundering suspicions.

Transaction Analysis Summary

Blockchain forensics revealed BitGrail’s hot wallet repeatedly querying Nano nodes post-initial breach, intentionally unpatched for further drains—police deemed avoidable with basic security. Parallel lattices hid flows: sends unconfirmed until receives, breaking linear trails. Italian AMLD5 flagged unhosted conversions; U.S. Chainalysis-style tools later clustered to P2P scams/tax dodges. Over 230k accounts hit, with funds mirroring to suspicious addresses simultaneously from BitGrail/Mercatox, suggesting coordinated laundering.

Regulatory/Enforcement Actions Taken

Italy: Postal Police charged Firano December 2020 with fraud/bankruptcy/laundering; Florence Bankruptcy Court (2019) ruled Nano as “property” under AML laws, ordering insolvency and asset freezes. CNAIPIC confirmed operator complicity. U.S.: 2019 class actions (e.g., SDNY) alleged securities fraud tied to Nano promotion/BitGrail listing; IRS pursued unreported gains via peel tactics. Nano Foundation funded $1M victim legal aid. EU AMLD5 enforced VASP reporting; J5 taskforce highlighted Nano risks.

Links to Reports / Sources

Case Title / Operation Name:

BitGrail Nano

Country(s) Involved:

Italy, United States

Platform / Exchange Used:

BitGrail SRL (Italian Nano exchange)

Cryptocurrency Involved:

Nano (XRB)

Volume Laundered (USD est.):

~$146M (€120M)

Wallet Addresses / TxIDs :

BitGrail hot wallet (Nano block-lattice chains); specific addresses clustered via forensics

Method of Laundering:

Block-lattice duplication exploits, P2P unhosted wallet layering, peel chains to fiat off-ramps; feeless micro-transfers evading AMLD5/IRS tracing

Source of Funds:

Stolen user deposits via self-hack/fraudulent withdrawals from exchange hot wallet

Associated Shell Companies:

BitGrail SRL (Florence-based, declared bankruptcy post-theft)

PEPs or Individuals Involved:

Francesco Firano (“The Bomber”); No PEPs

Law Enforcement / Regulatory Action:

Italian Postal Police charged fraud/ML (2020); Florence court asset freezes, ruled Nano "property"; U.S. SDNY class actions; Nano Foundation victim fund

Year of Occurrence:

2018

Ongoing Case:

Closed

AML Network Risk Rating:

🔴 High Risk