Crypto-Crimewave Forces Online Police to Pursue Ill-Getten Assets | Cryptocurrencies
In July 2021, specialist police officers in Manchester embarked on an international cryptocurrency scam, seizing USB drives and an online vault containing £16m worth of digital coins, mostly ethereum.
A month earlier, Leicestershire police confiscated 10 types of cryptocurrency after raiding the home of a drug dealer who used digital assets to buy and sell Class A drugs.
Both operations pale in comparison to the Metropolitan Police’s crypto record of the same year, worth £180m. But all three, and many more, are part of a wave of cryptocurrency spreading today that is being laid bare today by a series of freedom of information requests.
the Observer requested data from the 45 regional police services across the UK asking for a breakdown of cryptocurrency seizures since 2017. Information returned from the 27 forces that responded reveals a big change: there has been a significant increase in the number raids, and a proliferation of the types of digital coins that criminals use to invest the proceeds of their activities.
More than half of responding forces seized cryptoassets in 2021, confiscating or restricting access to 22 different types of digital currency. This is a significant increase from 2020, when four types of crypto were seized, by eight police departments. The figure was even lower in 2019, when only two types of digital currency were seized.
While the best-known digital currencies, such as bitcoin and ethereum, topped all others, the figures reveal the growing popularity among convicted and suspected criminals of much lesser-known rivals.
“Bitcoin is still essential: it’s digital gold,” says Gurvais Grigg, who spent 23 years at the FBI and now works as chief technology officer for data consultancy Chainalysis, which helps private companies and law enforcement to follow the movement of cryptocurrencies. “You have seen this emergence of ethereum, ‘stablecoins’ [cryptocurrencies pinned to a real-world asset] and a much more diverse market. As a result, you are going to find more of these currencies in the pockets of criminals as they take them from people. »
In the Leicestershire case, the police emerged with assets such as Enjin Coin, Polkadot, Neo and even Chiliz, the crypto-tokens sold to football fans to allow them to access benefits and vote on football decisions. their clubs.
In Wales, the South Wales Regional Organized Crime Unit seized eight crypto-assets, including one called Cake, while its south-west counterpart confiscated seven, including the Luxury Coin.
“It’s an emerging area that’s hitting us like a tidal wave, and policing needs to adapt with the times,” says Phil Ariss, who coordinates the national police response to cryptocurrency.
“It’s a big learning curve, but we’re doing well.”
He says 300 police have been trained in cryptography, and hundreds more are expected to receive instructions. But the scale of the challenge is even greater than described by the Observer access to information requests.
While some departments haven’t made seizures themselves, “most are involved in investigations,” he says, with officers working on cases involving between 35 and 40 types of exhibits.
“It’s not just about investment and theft, in some extreme cases it’s about financing terrorism. It can be buying child abuse images, money laundering. We see a huge range of cases through law enforcement,” he says.
Most law enforcement agencies do not disclose the amount of cryptocurrency involved for fear that other malicious actors, armed with such granular details, could pinpoint when the seizures took place. Leicestershire Police said it could alert them to an investigation that could affect them, allowing them to take action to hide ill-gotten gains.
However, Dyfed-Powys Police, who patrol a largely rural area of which Llanelli is the largest town, told the Observer he had taken possession of 82 bitcoins in 2021, worth £2.5 million at the most recent price.
When the police confiscate these digital assets, they are not well equipped to store them themselves. Instead, Avon and Somerset Police explain, they outsource this work, storing the premium “in a secure wallet with a third-party provider”.
They decline to name the companies involved, citing security concerns; there is a risk of crypto exchange workers being targeted. In 2017, Pavel Lerner, a UK-based money changer, was kidnapped by gunmen wearing balaclavas in Ukraine. He was only released after paying a ransom. All police departments that responded to FoI inquiries cited this case as a reason why they would not disclose the holders of seized cryptocurrencies.
“The above incident is not the only one of its kind,” Avon and Somerset Police said. “As such, providing information to the general public about the volume of stored assets and where they are stored increases the risk of cyberattacks, insider threats and other hostile actions by those wishing to infiltrate supplier or law enforcement.”
In theory, the growing appeal of cryptocurrency to criminals is obvious. Large sums of money can be sent quickly across borders, into jurisdictions that do not necessarily cooperate with UK law enforcement.
According to Grigg, however, criminals shouldn’t be overconfident. Transactions that take place on the blockchain are, by their nature, logged. This means that given the time and resources necessary, they can be tracked down and the perpetrators apprehended long after the crimes have been committed.
On the dark web, mixing services are available that allow criminals to launder their crypto, mixing it with other types of assets to disperse the paper trail and stun investigators.
But Grigg says determined, well-resourced investigators can still make it happen in the end. “Tracing tools have improved and data availability is better,” he says.
The rising number of foreclosures in the UK is not just a reflection of an increase in crime, he says, but of the growing ability of police to stop it. Furthermore, he points out, the legitimate crypto market has grown faster than the volume of crime-related transactions. Rogue crypto addresses received $14 billion in 2021, according to Chainalysis — a record sum, but an all-time low in terms of share of total volume, at just 0.15%.
Yet as long as the crypto world develops rapidly, the challenge for law enforcement will grow along with it.
A separate Freedom of Information disclosure, shared with the Observer, reveals a significant increase in reports of crypto-related fraud over the past year. According to City of London Police, 9,607 such reports were made to the national Action Fraud helpline last year, up from 5,581 the previous year and 3,558 in 2019. Losses of more than £200 million.
David Gerard, author of 50ft Blockchain Attack, says more crypto equals more crime. “More people are using the stuff,” he says. “There are minor coins, called ‘shitcoins,’ for everything these days.
“There will be a lot more scams because more people are promoting them. Times are tough, people are worried, so they fall prey to false hopes and get-rich-quick schemes.
But Ariss points out that the greater the public interest in crypto, the greater the awareness and understanding among police officers trying to prevent ordinary people from becoming victims.
“The [expansion] of crypto in the consciousness of the general public also affects the police. You just have to take the subway and you see advertisements; crypto companies sponsor sports teams. On Crypto.com, Matt Damon approves of it.
“There is an awareness that permeates, and in some ways, the challenge [of training officers] is easier now than it has ever been.
Ariss says British police are keeping pace, so far.
“We are well positioned relative to some international law enforcement partners.
“The wheels of justice are turning slowly, so some of this good news hasn’t come out yet, but time will show that we are doing a very good job.”