(First posted on June 26, 2019)
Ironically, a big difference between stealing physical and digital assets is the paper trail. When someone steals $100 and uses it to buy a meal at a restaurant, the restaurant likely won’t notice the money was stolen. But if someone steals cryptocurrency, there’s a digital trail which, unlike physical cash, can be used to find the thieves in a theft.
Our story starts in a quiet town with a retired couple and their family. Their years of hard work and investment had paid off. Their investment in Dash had done well and was worth over $5 million. Unfortunately, in the early hours of a morning in June 2018, thieves stole a lot of money from the family. Technically, the thieves used the victims’ private keys to steal from the victims’ hard wallets. The couple was connected to BlockchainIntel, and we began monitoring the addresses the thieves transferred the stolen funds to.
The thieves didn’t move the funds right away. A couple months after the initial theft, they started to move the funds to multiple wallet addresses across the world. During their hundreds of transfers, the thieves converted the Dash into other cryptocurrencies. We were able to track their every transfer, whether it was from one Dash address to another, or from a Dash address into another cryptocurrency. In the end, the thieves had transferred the stolen Dash into hundreds of different wallet addresses and exchanged the Dash for Bitcoin, Ether and Bitcoin Cash.
We collaborated with the FBI and traced the funds to an exchange in Asia. Through our connections with that exchange, law enforcement was able to obtain details of the account owner, which led to a bank account. By September 2018, three months after the theft, our tools and collaboration with law enforcement had identified a person involved in this theft. At that point, the victims, law enforcement and us at BlockchainIntel were hopeful there would be some recovery of stolen funds. But that’s when things slowed down. A lot.
It’s now June again, a year later, and the victims still have not recovered any of the stolen funds. Here’s a summary of events:
June 2018
Thieves, using the victims’ private keys, stole funds from victims’ hard wallets.
BlockchainIntel started monitoring wallet addresses that the stolen dash funds were transferred to.
July — August 2018
BlockchainIntel traced Dash funds through hundreds of Dash addresses and eventually into Bitcoin, Bitcoin Cash and Ether.
BlockchainIntel traced funds to a wallet address at an Asian exchange.
September 2018
Through BlockchainIntel’s connections, the FBI obtained identity of owner of wallet address at the Asian exchange. Owner is identified as a resident with a bank account in Asia.
October 2018 — present (8 months)
Law enforcement continues investigation.
BlockchainIntel explores avenues to support and expedite case where possible.
At BlockchainIntel, collaboration with law enforcement is crucial to our work. For this case, we’ve spoken to:
U.S. Treasury
U.S. Fincen
Multiple attorneys
U.S. Department of Homeland Security
Blockchain industry/law enforcement alliances
Through my personal network, I’ve contacted the Asian police department with jurisdiction over this case directly, asking them to work with our FBI.
In discussions with the above law enforcement agencies, I was told we face a number of obstacles that have slowed down the investigation:
Silos — Since this was a case originally brought to the FBI’s attention, no other government agency is really able to help in the investigation.
Priorities — Each government agency has priorities (like covering the Super Bowl) that take priority over other responsibilities.
Vacations/Other Duties — The victims were told key members were on vacation or had other responsibilities, and that they had to wait until the individuals returned.
Inter-law enforcement politics — Since we were dealing with law enforcement in another country, we had FBI agents in that country whose responsibilities included maintaining “positive relationships with foreign law enforcement.” These agents “tend to be more protective of their in-country contacts are err on the more conservative side when there is a possibility of a misunderstanding.”
Foreign politics are complex, especially in the current climate, so it’s not much of a surprise to see law enforcement across multiple countries treading carefully and slowly. But that’s little consolation to the victims who have had something valuable stolen from them over a year ago with no real closure in sight, despite the fact that the thief has been identified.
Safeguarding digital currency is a vital necessity for consumers, financial institutions and law enforcement alike, especially as it becomes a more attractive target for thieves. With more users of digital currency comes more theft attempts, and despite sincere commitments to safeguard transactions, thefts will occur. Law enforcement alone cannot keep up with such a volume so it’s critical that they collaborate deeply with the private sector to tackle this new challenge
We are emboldened by some tremendous work already being done in this space and are eager to lend a helping hand to law enforcement to help victims seek justice. Our doors are always open…
For more information on BlockchainIntel, email contact@blockchainintel.com or see the website.