Just a handful of years ago, few if any law enforcement professionals were adept at tracking and seizing cryptocurrencies, reports NBC News.
Tracking and seizing cryptocurrencies
When a California man was scammed out of hundreds of thousands of dollars of cryptocurrency in a fake romance this year, Erin West was able to track and freeze the money.
West, a deputy district attorney who heads the high technology crimes unit in Santa Clara County, said she believes the scammer lives in a country where there isn’t an easy path to extradition and therefore is unlikely to be arrested anytime soon. The money, however, is a different story.
“Our bread and butter these days really is tracing cryptocurrency and trying to seize it and trying to get there faster than the bad guys are moving it somewhere where we can’t grab it,” West said.
West is among a growing number of state and local prosecutors and law enforcement officials who have embraced a handful of digital tools that can monitor blockchains, the digital ledgers that track every transaction for most cryptocurrencies.
Digital ledgers facilitate cryptocurrencies
West said her team tracked the victim’s money as it bounced from one digital wallet to another until it ended up at a major cryptocurrency exchange, where it appeared that the scammer was planning to launder the money or cash out. West sent a warrant to the exchange and froze the money, which she plans to return to the victim.
It’s a stark reversal from just a handful of years ago, when cryptocurrencies were seen as an unmitigated boon for criminals. Cryptocurrencies allow users to instantaneously send money over the internet without intermediaries like banks. It can be done anonymously because the digital wallets that hold cryptocurrencies don’t have to be tied to people’s identities.
But because the digital ledgers that facilitate cryptocurrencies are public, law enforcement agencies have in recent years begun to gain the expertise necessary to track cryptocurrencies, leading bitcoin and ethereum to play roles in a significant number of criminal cases. During that time, such cases have overwhelmingly been the purview of federal agencies like the FBI, the Secret Service, the Justice Department and the IRS.
Those agencies have large budgets for tools like blockchain tracking programs and relationships with counterparts in friendly countries, which often lead to multinational cybercrime stings. But there are limits to the operations, such as when the hackers live in countries that don’t extradite to the U.S., like Russia or China.
The vast majority of legal requests, like warrants and subpoenas, to Coinbase, the largest U.S. cryptocurrency exchange, come from federal law enforcement agencies, according to the company’s two most recent transparency reports. Requests from all U.S. law enforcement agencies more than doubled, from 1,197 to 2,727, from the second half of 2020 to the first half of 2021, with state and local requests growing the most.
A Federal Trade Commission report published Friday found that 1 in 4 dollars lost in fraud payments is now paid in currency.
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Source: NBC News
