The US Department of Justice has seized bitcoin (BTC) worth 3.6 billion dollars lost in the Bitfinex notch in 2016, and it contains all the ingredients of a Hollywood movie – dizzying sums, colorful heroes, crypto heads and daggers – so much so that Netflix has already ordered a documentary series.
But who are the unknown heroes in this thriller? Federal investigators from several agencies, including the new National Cryptocurrency Action Group, painstakingly followed the money trail to form a case. FB also confiscated Colonial Pipeline’s crypto-paid ransom, which made headlines last year. According to Chainalysis’ recently released 2022 Crypto Crime Report, the Internal Revenue Service (IRS) seized $ 3.5 billion in cryptocurrency in 2021 through a non-tax investigation.
Trends indicate a declining ability for ordinary criminals and terrorists to use cryptocurrencies as a safe haven to hide their illegal income, illegal profits, donations and funding away from police authorities. For example, it was reported that Bitfinex hackers transferred a small portion of bitcoins to dark-skinned Alphabay exchanges, and from there to regular cryptocurrency exchanges. This is one of the versions the central bank used to arrest the accused.
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Law enforcement is better at examining cryptographic systems
Regulators and law enforcement in a select few countries have already increased the ante on blockchain investigations. Although they were originally lost at sea, some G-men and women have refined their strategy of searching and seizing assets, suing for confiscated digital currency and disposing of them after winning the case. Each of these specific steps demonstrates a deep understanding of this advanced technology.
There are several considerations in the investigation process, all of which require a deep knowledge of the blockchain area. Block chains can be transparent, but different methods must be understood and analyzed, such as switches, mixers, chain change and structuring (do some small translations to avoid validation). Suspects can be physically arrested, but police authorities must also ensure that digital assets are not moved out of the reach of the accused or their alleged employees. The confiscated cryptocurrencies must be under reliable protection while the case is being processed.
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The Financial Police certainly do not want to steal cryptocurrencies while the case is in court. The confiscated cryptocurrencies are usually auctioned off and the proceeds go to certain government accounts. But when there are innocent victims, the recovery process is crucial to the credibility of the judiciary.
Blockchain investigation is part of the larger field of digital investigation.
Blockchain analysis and investigation do not live alone on a desert island. Several levels of cooperation are required to bring perpetrators to justice. First, the growing success of law enforcement in tracking cryptocurrency is due to the tightening of the Know-Your-Customer (KYC) regulations for institutions that convert fiat to cryptocurrency and crypto-to-cryptocurrency. In addition, other digital forensic techniques are used, such as data collection and evidence from seized cell phones and computers.
In addition, there are partners in the private sector who support monitoring, enforcement and problems with cryptocurrency. Currently, many companies offer blockchain analysis tools such as identifying damaged wallets, assigning risk scores to wallet addresses, using analytics and artificial intelligence techniques to identify suspicious patterns and more. By using such tools and methods, investigative agencies can become more effective. Armed with KYC information under the Anti-Money Laundering Act (AML), prosecutors and their counterparts in securities, commodities, tax and currency regulators conduct off-line investigations in the real world.
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International cooperation is also critical. Criminals like to keep their belongings out of the reach of the law. Law enforcement agencies must cooperate with partner agencies in other countries. Financial Action Task Force on Money Laundering (F.)