Fighting crypto crime starts with fighting the many misconceptions that have built up around it.
Like the idea that cryptocurrency transactions are untraceable and anonymous, for example, and that the blockchain industry doesn’t care enough to investigate bad behavior or take action to prevent it.
Neither is true, said Matthew Price, head of intelligence and investigations for the Americas at Binance, the world’s largest crypto exchange.
“There is the perception out there that exchanges just don’t care, that crypto is the Wild West and no-one wants to cooperate with law enforcement—and that’s just patently false,” Price told Decrypt.
Price, a former IRS agent who also spent time as a targeting officer with the CIA, is one of numerous recent recruits from the government to join Binance’s growing investigations team, including longtime IRS special agent Tigran Gambaryan, now global head of intelligence and investigations at Binance.
Crypto crime fighters
When Price and Gambaryan were with the government, they would routinely collaborate with crypto exchanges, including Binance, to share information and shut down crypto-related fraud.
Now that they’re on the inside, they and their colleagues are using their expertise to train law enforcement organizations all over the world on how to deal with crypto crimes, including everything from money laundering and nation state hacks to ransomware and romance scams.
#Binance has been collaborating with law enforcement & institutions globally, to strengthen market understanding & efforts to prevent, investigate & fight cyber crimes.
Read through to learn more 🔽 pic.twitter.com/l672DJq0PW
— Binance (@binance) September 6, 2022
Binance has hosted workshops on crypto and blockchain technology for law enforcement across the US and Europe, Canada, Brazil, Argentina, the Philippines, Singapore and Sweden, with future workshops planned in Columbia and Mexico.
“As a former law enforcement officer, it’s heartening to see this kind of willingness to collaborate between public and private,” Price said. “Collaboration and sharing information back and forth is the only way you’re going to combat these things, considering the speed at which technology—and criminals—evolve.”
Follow the money
Although the amount of cryptocurrency-based crime has fallen by around 15% so far this year—a bear market will do that—crypto exchanges and law enforcement aren’t resting on their laurels.
Criminals are, “always looking for the most efficient means to do their thing,” Price said, and the fact that cryptocurrency streamlines and facilitates cross-border transactions is a double-edged sword.
What is a ransomware attack other than the 21st century version of mafia extortion? What is a pig butchering scheme if not a modern adaptation of the Nigerian prince email scam.
But while the means have evolved, the motive is the same in the majority of cases: money. And it’s easier to follow the money when you just so happen to have a permanent ledger of everything that’s happening.
Crypto transactions can be traced on the blockchain, and that gives investigators a leg up in the fight against crypto crime.
Nowhere to hide
Cash that disappears into a Swiss bank account isn’t public. But everything that happens on the blockchain is.
If you went to Bank of America and asked them how much exposure they have to criminal marketplaces, they couldn’t tell you, at least not definitively, Gambaryan said.
“But I can go right now and see exactly how much exposure we have to those entities, which is unheard of in the financial sector,” he said. “We’re teaching investigators and regulators how to leverage this and we’re demystifying cryptocurrency to shed the image people have that it’s anonymous.”
Forensic accountants can use the tools provided by blockchain analysis firms like Chainalysis and TRM Labs to see how crypto moves through the blockchain and then tie it to information saved by entities like Binance, including a user’s IP address and transaction records.
Even so, catching crypto criminals remains a cat-and-mouse game, which means that the industry needs to help law enforcement get sharper.
“Nobody, including Binance, wants criminal activity on the platforms,” Gambaryan said. “We’re empowered to do our thing to stop it, but we’re just a piece of it.”
Building blockchain expertise
The challenge is that not enough members of law enforcement have the blockchain forensic expertise to tackle a crypto-related criminal investigation.
But experienced investigators like Gambaryan, Price and their colleagues—including Jarek Jakubcek and Nils Andersen-Röed, both former Europol agents who now lead intelligence for Binance in APAC and EMEA, respectively—can educate detectives and regulators on the mechanics of cryptocurrency and how to identify and handle crypto cases.
The training Binance offers differs depending on the market and the sophistication of the audience. In Canada, for example, where law enforcement already has some crypto experience, the training is more focused on topics like advanced investigative techniques and preventative measures, whereas in other countries it makes sense to start with the basics, like a primer on what sort of information Binance has and what steps are involved in freezing an account.
Over time, the more investigators that are out there and who know what to look for, the cleaner crypto will be for everyone, Gambaryan said.
Beyond intro sessions, Binance is also sometimes called in to provide more specialized training.
The team was recently invited to a conference in Brazil where they were asked to explain how cryptocurrency can be used to aid in human trafficking-related crimes. During his time at the IRS, Gambaryan worked a case that led to the 2019 takedown of the world's largest darknet child sexual abuse material site, which was accomplished by tracking Bitcoin payments. The site’s administrator was arrested and 24 children were rescued.
“It’s a real-world impact,” Gambaryan said. “If anybody ever tells me that Bitcoin is bad, I always keep in the back of my head that if Bitcoin was not around, those kids would still be abused.”
Making a difference
There are also multiple examples of the real world impact that Binance’s workshops have had for law enforcement agencies around the world.
In a recent kidnapping case in a large Brazilian city, the perpetrators demanded a large cryptocurrency ransom. One of the investigators on the case had attended Binance’s training program and was able to trace the criminals and figure out who they were. The victim was saved, and the kidnappers prosecuted.
The Binance investigations team is also frequently contacted by people they’ve trained with requests for help or to get advice on a case.
The week after hosting a workshop in Canada, Binance started getting calls from the Royal Canadian Mounted Police and from regional and provincial agencies looking for a consultation.
“From there we’re able to help victims recover funds, and it’s the same story everywhere we’ve done these presentations,” Price said. “Based on the number of requests we’re getting—which has skyrocketed—this is definitely making a difference.”
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