Is what Chainalysis did illegal?

No, because it does not violate any of the laws imposed in the United States, where it is headquartered.

But...

Is Chainalysis a bad actor?

Yes, because it has set up nodes for the sole purpose of attempting to violate the privacy of the blockchain #Monero

Zero ethics.

It's like a cop who thinks there are burglars in the neighborhood, spying on every house, which has its doors and windows locked, where the owners seek their privacy.

This attitude of the "policeman" Chainalysis violates that privacy, without having proof that the neighbors are criminals.

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It's their job to find vulnerabilities and jail dissidents like the tornado cash guy we can't expect nothing less than that from them. What we can do is to learn and improve privacy, use vpn by default don't use bad nodes on monero/bitcoi and bad relays here on nostr.

In one sense, what they're doing is useful, because I'm fairness to them, they work in the open.

I'd much sooner they did this than work in secrecy like the Israeli company who clearly worked for years to crack iPhone security.

That certainly the rational devil's advocate position.

That's a example of why we have secure every step in the ecosystem, including countermeasures against spys like that.