CYBER CRIME INVESTIGATION AND CRYPTOCURRENCY TRACING IN THE MODERN ERA
WHAT ARE CRYPTOCURRENCY FORENSICS AND ASSEST TRACING?
Asset tracking and cryptocurrency forensics are research techniques for monitoring financial activities on the blockchain. They are employed to find stolen crypto-assets and track down criminals. For civil lawsuits, criminal prosecution, insolvency procedures, regulatory enforcement, and verdict recovery, the ability to identify and find digital assets can be crucial. The inquiry and recovery procedure for victims of online fraud, theft, hacking, and extortion plots frequently includes cryptocurrency tracking.
HOW BITCOIN AND OTHER CRYPTOCURRENCY CAN BE TRACED
Many people think that using coins is entirely private. On online blockchain ledgers that do not include names, locations, or other individually identifying information, transactions for Bitcoin and other virtual currencies are openly published. Users are only identified by their cryptocurrency address, which is a lengthy string of letters and numbers. To break through that wall of anonymity, law enforcement agencies, authorities, and finance detectives have created cutting-edge techniques. Under certain circumstances, it is possible to de-anonymize bitcoin transactions using intelligence tools and research methods related to blockchain, such as the examination of typical spend and address reuse. Cybercriminals have refined their techniques for money laundering, such as layering, and embraced new privacy-enhancing technologies in reaction to increased monitoring and surveillance. Across bitcoin marketplaces, the cat-and-mouse game between crooks and detectives keeps getting more intense.
WHAT KIND OF INFORMATION CAN BE TRACED?
Identification of the offender and the location of their assets are the twin objectives of cryptocurrency forensics and asset tracking, which are followed through a number of areas of research and analysis:
Attribution Data: Blockchain intelligence tools gather and examine ownership attribution data for thousands of organizations, which can then be used to de-anonymize blockchain addresses for the purpose of identifying offenders and other potential research subjects. These systems hardly ever reveal personally identifying information (PII) about specific cryptocurrency asset owners, but they might reveal connections to known fraud schemes or criminal organizations, as well as transactions with other relevant parties like exchanges and fiat off-ramps where illicit proceeds are turned into cash.
Transaction Tracing/Mapping: is the process of transforming transactional data into maps and flowcharts that depict interactions between the topic and well-known exchanges and other organizations, tracing money transfers to their final destinations. It is much simpler to identify patterns, like stacking and peel chains, which are frequently used in money laundering, when they are visualized. Powerful tools that facilitate mapping and evidence gathering are used by experienced detectives. This method is more effective and efficient than open-source or blockchain search engines that require manual evaluation of ledger records.
Cluster analysis: A cluster is a collection of cryptocurrency accounts under the same owner or authority. The quantity of information accessible for de-anonymization and asset tracing can be greatly increased by shifting the emphasis of an inquiry from a single address to a bigger cluster. It is also possible to find out whether any connected addresses have a significant present value or UTXO using cluster analysis.
Subpoena Targets: In accordance with Know Your Customer (KYC) and Anti-Money Laundering (AML) laws, commercial bitcoin exchanges, decentralized finance (DeFi) businesses, and virtual asset service providers demand identification authentication of new customers. They become a very useful tool for de-anonymizing individuals who have used their services to purchase, exchange, retain, or cash out cryptocurrencies as a result. Through civil requests or criminal orders, it may be possible to acquire the personally identifying information of registered proprietors of addresses and wallets, as well as their financial information.
Current/Historical Value: Important cryptocurrency accounts are important signs of a financial revival. They may be suitable targets for garnishment during the execution of civil judgments or for seizure orders issued by criminal authorities.
Total Transactions: The volume of bitcoin transactions may be a good indicator of the size and number of victims of a fraud plan. Law enforcement usually pays more attention to complaints when a criminal syndicate has harmed numerous individuals. Class action lawsuits in civil court may also be suitable for more complex plans.
Risk Profiling: Automated risk-scoring is carried out using sophisticated algorithms that follow the activity of the target address(es) and spot connections to well-known groups like exchanges, mixers, peer-to-peer swaps, sanctioned events, ransomware networks, and darknet marketplaces.
IP Address: Through blockchain monitoring systems, which operate networks of nodes that “listen” and “sniff” for Internet Protocol (IP) addresses linked with particular transactions, privacy-piercing information is gathered. When IP addresses are accessible, they can reveal details about the subject’s location at the moment of the exchange.
The technological skill of the perpetrators and the measures they take to hide their names varies among cryptocurrency theft and fraud schemes. The success of the inquiry and conflict settlement procedures is influenced by a number of variables, including the level of activity in other nations or overseas locations. A thorough strategy that blends blockchain forensics with additional, off-chain inquiry is often beneficial for complicated fraud investigations. deception detectives typically start by reading through the chronology of events and the plan in order to collect tangible proof of deception and quantify the magnitude of financial losses. To find out how stolen money was used, relevant cryptocurrency transactions — including deposits at business exchanges — are tracked. The development of attribution information on account owners and the identification of groups of linked accounts controlled by a single entity are done using forensic analysis and blockchain intelligence tools. Digital analysis of email information, name servers, and IP address geolocation may also be used in investigations.
To definitely identify the perpetrators of bitcoin scam schemes, additional fact-finding and legal evidence methods, such as summons in civil lawsuits or warrants in criminal trials, may be required. In addition to assessing suitable subpoena targets (such as KYC-compliant exchanges) and inspecting bank records and related materials acquired through subpoena, Hudson’s detectives assist legal counsel logistically. It might be acceptable to find and speak with additional victims for potential class members in class action cases.
Upon definitely identifying the leaders, due diligence may be carried out to gather pertinent information about their backgrounds, including an examination of their criminal records, educational background, financial obligations, and any pattern of participation with prior frauds. These studies could involve gathering and studying money records, court documents, and company documents. It might be essential to coordinate these efforts with local sources abroad if the plan was devised outside of the United States. The investigators at POLYGON DECIPHER help customers create official criminal reports and work with local and international law enforcement organizations.
Why does the secret service investigate the use of digital assets such as cryptocurrency?
Any individual who disobeys laws pertaining to financial systems must be found, investigated, and apprehended by the Secret Service. Digital assets have been used to enable an expanding variety of offenses in recent years, including various fraud schemes and the use of malware. While the United States has been a leader in setting standards for regulating and monitoring the use of digital assets for anti-money laundering and countering the financing of terrorism purposes, poor or nonexistent implementation of those standards in some foreign jurisdictions is posing significant risks related to illicit financing that hurt the American people and our international partners.
For instance, transnational organized crime frequently uses digital asset service providers in countries that have not yet successfully adopted international standards to launder and cash out their illegal profits. The American people and our international allies are exposed to additional risks due to the ongoing development of decentralized financial networks, peer-to-peer payment activity, and opaque blockchain ledgers. It is in the national interest to take steps to reduce these dangers when digital assets are misused and used in illegal ways through law enforcement action and other governmental agencies. The U.S. Secret Service is dedicated to doing its bit to protect the country from unauthorized use of digital assets.
Reporting Cryptocurrency and Digital Asset Investment Scams
With the aid of POLYGONDECIPHER, the U.S. Secret Service has noticed a sharp rise in bitcoin and digital asset trading fraud. Social media users, online daters, and people who use business networking sites are frequently the victims of these schemes. Please get in touch with POLYGON DECIPHER at www.polygondecipher.org if you have lost money as a result of a bitcoin trading scam or other crypto related fraud schemes. Your email should contain the following information: URLs you have visited, contact information for scammers (phone numbers, email addresses, and social media profiles), cryptocurrency addresses used in transactions, transaction hashes (transaction IDs), and dates of the transactions.
