What Makes a Blockchain Tracing Report Hold Up in Court: Lessons from the Bitcoin Fog Appeal
On 25 September 2026 the U.S. Court of Appeals for the D.C. Circuit affirmed the convictions of Roman Sterlingov, who was convicted of money laundering and operating an unlicensed money transmitting business in connection with the Bitcoin Fog mixing service (opinion). Much of the appeal turned on one question litigators are now asking in civil and criminal matters alike: when is blockchain tracing evidence reliable enough to put in front of a jury?
The government's case relied on expert testimony built with Chainalysis Reactor, a commercial tracing tool. The defence argued the tool had never been peer-reviewed, had no known error rate, and that its source code should have been disclosed. The court rejected those arguments and held that the trial court did not abuse its discretion in admitting the testimony.
For counsel who commission tracing reports, or who face one, the decision is less about one vendor than about what a court actually examines. Here is what it relied on, and how to apply it.
What the court did not require
Three things a challenger might expect to be decisive were not.
Peer review. The court accepted that the tool had not been peer-reviewed, noting that some techniques are too new, or of too limited outside interest, to have been peer-reviewed, and that blockchain tracing falls in that category. Rule 702 and Daubert, it said, set out flexible considerations, not a checklist: "the Daubert factors are not exhaustive" (slip op. 22).
A known error rate. The experts did not know the tool's error rate. That did not end the inquiry. The court looked instead at evidence that the outputs had been checked against reality.
Source code. The defence's counsel and qualified experts received the tool's heuristics and underlying assumptions under a protective order, but not the code itself. Because he had not shown that he needed the code, particularly once his counsel had the heuristics, the court concluded that Sterlingov "has failed to demonstrate any material impairment of his defense" (slip op. 30).
What the court relied on instead
An explained method. The experts described how addresses were grouped (co-spend, behavioural and intelligence-based heuristics) and the assumptions behind each. The court credited their in-depth testimony on how the tool worked and the assumptions it made.
Corroboration. The court pointed to evidence of attributions being compared with information obtained later through legal process. In one test, an FBI agent searched the tool's Bitcoin Fog cluster for five addresses the service had used in the government's undercover transactions; four of them were identified.
Conservative results. The trial court found the analysis deliberately conservative and under-inclusive: it was more likely to miss an address than to attribute one wrongly. The appeals court treated that as consistent with reliability, not as a defect.
Use in the field. The court noted testimony that the tool was an industry standard used by law enforcement and private-sector specialists, and treated that use as an acceptable proxy for general acceptance in the relevant community.
A checklist for counsel
Whether you are commissioning a trace or testing the other side's, the decision points to the same questions.
Does the report state its method? Which heuristics grouped which addresses, and what each one assumes. "The software said so" is not a method.
Does it separate what is confirmed from what is inferred? A transfer recorded on-chain is a fact. That two addresses share an owner is an inference. A report that blurs the two invites the strongest cross-examination.
Is there corroboration? Exchange records, subpoena returns, known addresses or other independent evidence that tests the conclusions against something outside the tool.
Does it err on the side of caution? A report that attributes only what it can support, and says what it could not trace, is easier to defend than one that claims everything.
Does it state its limits? The period covered, the chains and tokens examined, which counterparties were screened and which were not, and data that could not be retrieved.
Can the analyst explain it? The person who signs the report should be able to walk a judge through each hop and each assumption, and say where the evidence stops.
Is the evidence preserved? Transaction hashes, the data's retrieval date, and a record of what was relied on, so the work can be reproduced.
What this means in practice
The Bitcoin Fog decision is not a blanket endorsement of any tool, and courts in other circuits will apply Rule 702 to their own facts. What it does show is that judges look past the software to the work: a stated method, honest limits, corroboration and an analyst who can explain it. A report built that way is easier to rely on and harder to attack.
How we can help
ComplyChain Solutions prepares blockchain tracing reports for counsel in fraud, insolvency, divorce and whistleblower matters. Every report states its method and its limits, separates confirmed from inferred findings, and is signed by a named analyst who can explain it. Our fee is agreed in writing before work starts and never depends on whether funds are recovered.
If a matter with crypto in it is on your desk, start with a conflict check: email info@complychainsolutions.com. See how we work with law firms.
This article is general information, not legal advice. Speak to your counsel about the requirements that apply to your matter.
