Cryptocurrency – and Crypto Crimes – Are Having a Moment. What’s Your Strategy?
Cryptocurrency is finally having its mainstream moment after a decade of fits and starts. The market for this class of digital currency is valued at around $2 trillion today. And investors, including hedge funds, have been enjoying some serious ROI on their risky bet that cryptocurrencies would skyrocket in value. There are also signs that the first Bitcoin Exchange Traded Fund (ETF) may emerge sometime this year.
Consider Bitcoin for a moment, the original cryptocurrency and perhaps the most well-known brand in the market (Ethereum, Litecoin, Cardano, and Dogecoin are among the other notables). In 2009, the value of one Bitcoin was $0. As of April 14, 2021, it was worth just over an astonishing $63,000. Bitcoin also accounts for about two-thirds of the current cryptocurrency market, according to estimates.
Cellebrite Cryptocurrency Investigative Techniques (CCIT) is a three (3) day intermediate level course designed to provide investigators of all skill levels and opportunity to successfully complete cryptocurrency investigations. Learn more
On May 22, there’s more opportunity to reflect on Bitcoin’s meteoric rise in value. “Bitcoin Pizza Day” celebrates the first-ever Bitcoin transaction, initiated by a Florida man in 2010. He bought two large pizzas for 10,000 Bitcoin (BTC) — or about $41 at the time. Today, those same 10,000 BTC would be valued at around $560 million.
But there’s so much more you can buy now with Bitcoin than you could a decade ago. Leading retailers and brands like Home Depot, Overstock.com, and Microsoft all accept this relatively new form of currency. Even entrepreneur Elon Musk, the CEO of Tesla, has opened the door to Bitcoin payments for Tesla vehicles purchased in the United States and plans to expand that capability outside the U.S. later this year. (Musk’s Twitter messages on this subject, along with Tesla’s purchase of $1.5 billion worth of bitcoin in February 2021, are credited with the recent surge in cryptocurrency prices.)
The Darker Side of Cryptocurrency
So, yes, cryptocurrency is having a moment and industry players are banking on a bright future for the industry, too. One upstart cryptocurrency exchange platform, FTX, is clearly so confident about its prospects that it recently paid $135 million to put its name on Miami’s former American Airlines Arena.
But this heady time for cryptocurrency is tarnished by an association with sinister elements. Oxford Academic identified $76 billion in illegal activity — drugs, terrorism, human trafficking, money laundering, and more— involving cryptocurrencies. Cryptocurrency also has become the preferred method of payment for most ransomware operators. New York Attorney General, Letitia James also warns of huge scams on the horizon for crypto investors.
Ransomware crimes are also skyrocketing. To make things worse for victims of ransomware, in late 2020, the U.S. Treasury Department and its Office of Foreign Assets Control (OFAC) advised businesses that ransom payments made to sanctioned ransomware operators are considered illegal. In short, if a victim pays a ransom to one of these cyber actors, they could be hit with a hefty fine.
As for real-world crime, cryptocurrency has been demanded as ransoms in kidnapping cases from Costa Rica to Norway in recent years. These instances have thankfully been rare (and the Norway case turned out to be a murder cover-up). But these few cases are the start of a trend that is expected to increase. For example, cryptocurrency is seeing a rapid rise in popularity in Nigeria — a country where kidnapping has become a profitable business, according to a 2020 report by consulting firm SB Morgen. It’s not hard to imagine the possibilities.
Pseudonymous Doesn’t Mean Anonymous
If you need further proof of crypto’s appeal to criminals, there are plenty of bad actors aiming to steal it — or even the machines used to mine it. Cybercriminals ranging from lone wolf opportunists to state-sponsored hackers like North Korea’s Lazarus Group are well-immersed in the world of crypto. Some criminals simply prefer to “borrow” cryptocurrency versus stealing it outright — like the hacker who penetrated Ethereum Classic’s blockchain, rewriting the transaction history, and “double spending” $1.6 million.
So, why is cryptocurrency so popular with criminals? Transactions can happen fast, and they’re hard (though not impossible) to trace. Blockchain-based currency rose to popularity within the criminal community because of its pseudonymity. As the Bitcoin Project explains about its cryptocurrency model, “transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances.”
For law enforcement agencies, the chances of encountering a criminal case that involves some type of cryptocurrency transaction are rising fast—not just in cybercrimes, but in “traditional” crimes such as drug trafficking, terrorism, gang-related crimes. So, now is the time to create a robust crypto strategy and build your agency’s capacity to investigate these crimes by adopting best practices, equipping your personnel with the right training and tools, including Digital Intelligence solutions, understanding what resources are available to support your team, and more.
Setting up a proper crypto strategy begins by taking time to evaluate your resources and goals. How often is cryptocurrency turning up in investigations and what will be the anticipated impact of crypto on future investigations? How are you evaluating cryptocurrency in cases today? Do you have the right tools to investigate crypto crimes properly? If not, what solutions should be integrated into your existing workflow to make the job easier?
Lastly, how well equipped are your investigators to investigate these types of crimes? Would additional training help or would it make better sense to farm these kinds of investigations out to other vendors who have the advanced services and personnel to handle crypto investigations more efficiently?
Only by asking these questions can you begin to shape a strategy to better prepare your agency for the increase in crypto crimes as crypto’s popularity grows. Getting yourself better educated should also be on your checklist. Looking for a starting point? Check out these recent Cellebrite webinars on-demand:
- How Cryptocurrency Investigations Are Tipping the Scales in Ransomware, Fraud and Theft Cases
- Digital Intelligence Produces Crucial Clues to Trace Cryptocurrencies
Also, check back here soon for more articles on cryptocurrency trends, challenges, tools, and tips for developing an effective crypto strategy for your agency. For more advanced learning, check out the Cellebrite Learning Center for upcoming Cryptocurrency courses and classes.
For more information on how Cellebrite’s cryptocurrency solutions can help your agency, click here.
About the Author: Leeor Ben-Peretz leads Cellebrite’s strategy & corporate business development functions. He brings over 20 years of experience in the forensic, telecom, and software security markets, having served in key business development and product management related positions at industry-leading companies such as Aladdin Knowledge Systems (NASDAQ: ALDN), Pelephone Communications, Comverse (NASDAQ: CMVT), and InfoGin.
During his eleven-year tenure with Cellebrite, Leeor has been instrumental in driving the evolution of the company’s offering from a single product to a rich portfolio of innovative products, solutions, and services. Leeor holds an Executive MBA degree from the Hebrew University of Jerusalem, and a BA degree in Business and Economics from the Academic College of Tel-Aviv.