The inception of blockchain technology ushered in a novel era of digital transactions. It introduced a realm where transactions seemingly occur under the cover of anonymity, making the technology both enticing and somewhat daunting. The illusion of anonymity has attracted a broad spectrum of individuals, some of whom exploit digital currencies for illicit activities, under the impression that the cryptographic veil of the blockchain would obscure their identities and illegal actions.
Cryptocurrencies such as Bitcoin operate on a pseudonymous basis, enhancing the perception of anonymity. Each transaction endpoint is represented by unique cryptographic addresses, complicating the process of linking transactions to tangible world identities. This feature, coupled with the decentralized nature of cryptocurrencies, facilitates peer-to-peer transactions, effectively bypassing the need for traditional intermediaries like banks. This assumed impermeability of the blockchain has fueled a significant increase in cybercrime. Unscrupulous individuals attempt to sidestep the law, leaving their tracks hidden amidst the labyrinth of cryptographic hashes and keys.
However, this assumed impenetrability is far from the truth. The blockchain is not as anonymous as it initially seems. Every transaction conducted on the blockchain is meticulously recorded on a public ledger, accessible to anyone, anywhere across the globe. This ledger provides comprehensive information about each transaction, including the sender and receiver's public addresses, the time of the transaction, and the amount transferred.
Though these public addresses are pseudonymous and do not directly link to personal identities, persistent observation and analysis can reveal patterns and establish linkages over time. These electronic footprints, when scrutinized, can often lead to the unraveling of illicit activities and the unmasking of the perpetrators behind them.
That said, tracing transactions and assets on the blockchain is no mean feat. It is a daunting task that requires specialized knowledge, expertise, and access to sophisticated tools capable of penetrating the intricate maze of digital transactions. ForensX Intelligence Services has carved a niche for ourselves in this complex field with a dedicated team of Crypto Tracing Certified Examiners (CTCE) who specialize in tracing crypto assets on the blockchain.
The CTCEs at ForensX are experts in their field. Using state-of-the-art technology and software, we meticulously trace the exact movement of ill-gotten assets on the blockchain. We compile detailed reports outlining the precise flow of the transactions in question, effectively locating the digital assets. The task of our investigators is akin to that of digital archaeologists, who painstakingly unearth hidden connections in a network that appears chaotic at first glance.
Investigators at ForensX apply a multi-pronged approach that combines blockchain analysis, transaction tracing, and data visualization models. Our objective is to identify evidence of criminal activity and provide actionable information to the authorities. Our expertise is not confined to technology. We boast years of experience in forensic accounting techniques, enhancing our ability to trace and analyze financial transactions, whether in the realm of fiat or crypto.
Having established ourselves as industry leaders in blockchain analysis and cryptocurrency investigation, the CTCEs at ForensX have mastered the navigation of the complexities that the blockchain presents. Our work takes the ambiguous data of the blockchain and translates it into comprehensive and easily understandable reports for law enforcement agencies and legal professionals.
The forensic investigations undertaken by ForensX are reliable, with professional evidence and expert testimony provided to substantiate our findings. The value of such reports and testimonies is immense in judicial proceedings, as it provides authorities with the necessary ammunition to prosecute the offenders and maintain the integrity of the blockchain ecosystem.
This brings us to an important conclusion: while blockchain offers a degree of pseudonymity to users, it does not provide an absolute shield of invisibility. The more individuals and businesses adopt blockchain technology and cryptocurrencies, the greater the potential for misuse. It is imperative for society to stay one step ahead of the curve and be prepared to counter these threats.
The blockchain's transparency and traceability, once properly understood and harnessed, can serve as a powerful deterrent to potential fraudsters and scammers. It is a testament to the resilience and adaptability of our legal and technological institutions that they can transform what was once considered a shroud of secrecy into a tool for justice and accountability.
With our dedicated team of CTCEs, ForensX stands at the vanguard of this rapidly evolving landscape. Our work sends a potent message to those considering exploiting the blockchain for illicit activities: Your actions are not invisible; they can be, and will be, traced.
However, one must understand that even though the blockchain provides a greater degree of transparency compared to traditional financial systems, the task of tracing transactions isn't straightforward. The process involves resolving the disarray of transactions into a discernable format, mapping the flow of cryptocurrencies, and piecing together the fragments of data into a coherent narrative.
Blockchain explorers, tools that allow people to browse blocks and transactions on a blockchain, are the starting point. Investigators can use these tools to track the movement of cryptocurrencies from one address to another. But the path isn't always linear. Techniques like mixing, where several users combine their coins to confuse transaction paths, can make the process complex.
That's where the unique expertise of ForensX's CTCEs comes in. We use advanced tools and methodologies that can resolve even the most complex transaction histories. Our skill in forensic accounting, coupled with our in-depth understanding of blockchain technology, allows us to untangle the complicated web of transactions, unearthing the truth hidden beneath layers of cryptographic data.
The process doesn't end with the identification of digital assets. Digital currencies, once traced, need to be evaluated in terms of their worth. Given the volatility of cryptocurrencies, this task can be challenging. Yet, the CTCEs at ForensX are adept at this as well. We provide accurate evaluations of digital assets, making it easier for authorities to assess the magnitude of a case and prepare accordingly.
Moreover, with the rise of privacy coins like Monero and ZCash, which offer enhanced anonymity features, the tracing process can become more complex. Yet, the team at ForensX is well-equipped to navigate these added complexities. Through continuous learning and upskilling, we stay abreast of the latest developments in the crypto-space, ensuring that no matter how the technology evolves, ForensX remains ready to track and trace illicit activities.
So, while the initial allure of the blockchain might have been its perceived anonymity, we now know that this is not the case. The work of institutions like ForensX is ensuring that those who use the blockchain for illicit activities will not go unnoticed. As we move forward into this new digital era, we can rest assured that safeguards are in place to protect the integrity and security of our transactions. The seeming anonymity of the blockchain is indeed a myth, and thanks to the diligent work of organizations like ForensX, justice can be served even in the most cryptic corners of the blockchain.
The rise of cryptocurrencies has brought with it new opportunities and challenges. It has given birth to a new kind of digital economy, one that holds great promise but also one that requires careful vigilance. Tracking and tracing transactions on the blockchain may not be a simple task, but as we've seen, it is far from impossible. With the right tools and expertise, even the most complex transactions can be traced and illicit activities can be uncovered.
The message is clear: the blockchain is not a safe haven for illegal activities. Whether it's fraud, money laundering, or other forms of cybercrime, institutions like ForensX are working tirelessly to ensure that perpetrators can be identified and brought to justice. Our work is not just about tracing transactions, but also about creating a safer, more accountable digital economy.
In the face of evolving challenges and opportunities within the blockchain ecosystem, one thing is certain: the future of crypto lies in transparency, accountability, and the diligent work of organizations like ForensX. It's a future where the benefits of cryptocurrencies can be fully realized, without the fear of their misuse. It's a future where blockchain technology is not just about anonymity, but about trust, security, and the rule of law.
If you are looking to learn more about cryptocurrency investigation or need help tracing an asset on the blockchain, get in touch with a ForensX Cryptocurrency Tracing Certified Examiner today.
ForensX is a leading provider of forensic investigation services for the recovery of misappropriated cryptocurrency and other blockchain-based assets. We specialize in conducting complex crypto and blockchain tracing investigations, which involve tracking the movement of digital assets through the blockchain. This process can be used to help identify the individuals or entities responsible for the theft, as well as to aid counsel and/or law enforcement in the recovery of the assets.
Our team of Cryptocurrency Tracing Certified Examiners can help locate stolen digital assets, even if they have been moved through multiple channels. Our expert investigators can conduct a network analysis to identify the relationships between different entities involved in the theft, including the potentially numerous wallets or exchanges involved in the transactions.
One of the key benefits of using ForensX's services is the reliability of the expert reports and testimony provided. Our team of crypto investigators are well-versed in blockchain technology and have the necessary skills and experience to conduct thorough and accurate investigations. We use state-of-the-art tools and techniques to trace digital assets through the blockchain and can provide detailed reports and testimony that can be used in court.
ForensX cryptocurrency tracing investigators are valuable in commercial litigation trials for several reasons:
ForensX is a valuable resource for litigators looking to recover stolen cryptocurrency for their clients. Our reliable expert reports and testimony, as well as our range of other services, can help litigators build a strong case and recover stolen assets.
For help with your case, click here to learn more about cryptocurrency investigation or get in touch with a ForensX Cryptocurrency Tracing Certified Examiner today.
Last month we covered some of the common ways scammers attempt to steal your cryptocurrency (crypto). If you want to learn all of their deceitful strategies, go back and take a read. Otherwise, here’s a quick recap before we explore a few more of their manipulative tricks and the best ways to protect your crypto and other blockchain-based investments.
Now let’s explore a few more scams.
Everyone loves free right? What about free money or crypto? The problem is, nothing in life is ever free. These scams will offer you free coins, or match and multiply your crypto, promising to deposit coins into your wallet. They’ll position it as a once-in-a-lifetime opportunity that you can’t afford to miss but only if you transfer funds quickly. These strategies prey on FOMO – fear of missing out, and often get unsuspecting victims to act quickly and emotionally, without thinking things carefully through first.
Sometimes scammers will use social media as a platform for a giveaway, applying clever messaging to look just like a real account. When you click on the giveaway you go to a fake site asking for verification to get bitcoin, but you’ll have to make a payment first to prove your crypto account is legit. Not only will you lose the payment, you could have also clicked on a malicious link that just stole your personal information and your crypto assets.
Wi-Fi has definitely improved our access to the internet and made smart phones the handy devices they are. That being said, scammers have a plethora of ways they can obtain people’s information who have accessed the Internet on public Wi-Fi networks.
From setting up fake Wi-Fi hotspots of their own that mimic a legitimate public Wi-Fi network, to deploying malware on an unencrypted network, scammers have multiple tricks up their sleeves to tap into your personal online information, including your passwords, private keys, and account details.
It’s ugly, it’s personal and although not the most common scam, it can be devasting. Thieves will play on your insecurities or on your indiscretions. They send an email claiming to have evidence of visits to adult websites. Or claiming they have embarrassing photos, videos, or information about you.
They will threaten to expose you publicly or to your loved ones if you don’t pay them in crypto immediately. Never fall for this and report any blackmail attempts to the authorities.
No matter how these criminals try to trick you, their end game is all the same: they want your information or your hard-earned cryptocurrency and other digital assets. This definitive aim leaves a trail of warnings.
Take the time to pause and look for some of these signs before clicking, entering information, or paying anyone.
Watch out for:
No one in the financial world can promise guaranteed quick and large returns, especially in the volatile and unregulated crypto market.
When it sounds too good to be true it definitely is!
Promotion is one thing, and we know good marketing works. However, if you’re getting hit everywhere you look at online ads, offline promotion, or via influencers on your social media channels, it could be a fraudster at work. If you are feeling surrounded by amazing crypto deals, this may be a trap and warrants a little research.
Whitepapers are a legitimate sign of a cryptocurrency ICO (initial coin offering), and every real company has one. It explains how the crypto was designed and how it will work.
So, if you can’t find a whitepaper or if doesn’t make sense, beware.
Authentic crypto investment companies and NFT projects share who’s on the team, if not down right brag about their major players.
If you can’t find information online about an investment manager who’s contacted you, whether on their business website, LinkedIn or other social media platforms, this might be a good time to question the legitimacy of the company or project.
Why does it have to be a crypto payment? Why now? No real company is going to demand you pay crypto in advance, and especially not on their urgent timelines.
If you are feeling unreasonable pressure to give in to their ominous demands: stop, drop and roll…away from that company now!
Know that real businesses, employers, and government agencies will never:
Whether it’s a celebrity you follow or your online love interest you’ve been chatting with for weeks, your crypto is not their concern. Don’t mix business with pleasure.
Protect yourself, use common sense and trust your gut. Crypto thieves can be convincing and manipulative.
It’s important to consider these simple steps:
Keep Your Wallet Safe: You would never hand over your physical wallet or a credit card to someone you don’t know or trust, so treat your digital wallet the same.
If anyone asks you for your private keys to get in on an investment opportunity, it’s a scam.
Watch Your Wallet App: Test out your wallet app with a small deposit first to ensure its the real deal. Any time you are updating the app watch out for suspicious behavior.
If you pick up on anything strange, terminate the update and uninstall the app immediately.
Cold Calls Aren’t Worth the Risk: Never invest with a complete stranger. A call out of nowhere offering you a great opportunity is too good to be true.
Keep your personal information and money in a galaxy far far away.
Put in the Research: Just because something is one click away doesn’t mean you should make that click. If you don’t understand how a crypto investment is working, stop and do the research.
Most companies are not scams. They will have whitepapers, teams, and reviews you can find online to verify their legitimacy. You can also look up the company on a recent credible/fake cryptocurrency list to ensure it’s a safe player in the digital space.
Use a VPN: Play it safe and rely on a legitimate virtual private network when you are doing digital transactions, especially in public.
A VPN will encrypt data being transmitted, preventing thieves from accessing your personal information and cryptocurrency.
Sometimes even the most cautious and savvy of us can still fall for a scam. Just thinking about losing your digital identity or savings is enough to tie your stomach into knots.
It’s important to catch it early on and move quickly.
If you accidentally gave a scammer access to your wallet or other digital assets:
Similar to any other fraudulent incidents, the next stop is your bank. Let them know if:
Other important steps to take are:
Cryptocurrency has disrupted the financial market. It’s unregulated and sophisticated, and full of risk. This makes it a hot commodity for investors. Combine these factors with crypto’s explosive growth, popularity amongst celebrities and big marketers, this translates to a lot of people wanting a piece of the action, including scammers.
Remember, all these scams are after two things: your digital account information and your crypto.
Play it safe, especially if you are new to the market.
Finally, rely on your common sense. The digital world is full of scams. If you don’t hand out money or personal information to people or companies you don’t know, then don’t give out your digital details, digital assets or cryptocurrency either.
Cryptocurrency (or “crypto”) has seen explosive growth since its inception with Bitcoin in 2009. The following year the first financial transaction using Bitcoin was completed when a Florida man negotiated to pay 10,000 BTC for two Papa John's pizzas priced at about $25. One Bitcoin was only worth .04 of a cent. But once it became available on the market its value began to grow crossing the $1 threshold in 2011.
At the time this article was posted, one Bitcoin is worth over $17,000 USD and there are more than 10,000 active cryptocurrencies in circulation.
So, what exactly is crypto? Well, it’s a digital currency and only exists electronically, so it must be bought, sold, or traded online or bought at a cryptocurrency ATM. Unlike regular currencies which are regulated by national governments, crypto can circulate without a central bank acting as an authority. People like crypto for many reasons. Quick payments, avoiding bank transaction fees and perhaps its most appealing attribute - promised anonymity.
Crypto can be stored in various ways; on a custodial wallet via crypto exchanges such as crypto.com and Binance, a software wallet via an extension on your computer or app on your phone such as Metamask, or on a hardware wallet or cold wallet.
Some forms of storing crypto have caused some big financial catastrophes for those who have lost their wallet or password, sent their crypto to the wrong person, or accidentally threw out their external hard drive. It can happen! The most famous case occurring almost 10 years ago in Wales when James Howell, during a house purge, forgot his Bitcoin was on the drive. The estimated worth is $184M. You can read about his latest plan to retrieve it from his regional landfill.
But back to those scammers who will go to great lengths to get your crypto. They will:
Now let’s delve a little deeper into the top 4 types of scams in the crypto market. Next month, we will explore a few more and give you strategies on how to protect yourself.
When it comes to crypto, a phishing scam is when a bad actor goes after your personal online wallet information. They’ll rely on a variety of tricks often through a fake email or website to lure you into sharing your private key information.
This key provides access to the funds in your wallet. Once the hackers have it, they steal the crypto in your wallet.
Unlike passwords used for all sorts of online transactions, users only get one unique private key to digital wallets. If it’s stolen, it’s exceedingly difficult to change it. To update a key, you need to create a new wallet.
Fake websites will pose as trading platforms or versions of official crypto wallets to trick you. Their domain name will look and sound similar to legitimate sites.
Fake crypto sites often operate in one of two ways:
As cryptocurrency investors are typically interested in playing the market, it’s no wonder scams are designed to reward these behaviors.
And there are plenty of ways to do this:
To summarize, crypto scammers are inventive, sophisticated, and relentless. They recognize weaknesses in the cryptocurrency marketplace;. The lack of authority and monitoring by government and large financial institutions leaves it vulnerable for the taking.
ForensX is a company that works on your side to help track and trace crypto currency transactions and get your money back. We work with financial institutions, insurance companies, private investigators and even individuals who have been wronged in a crypto scam.
Call or email to speak to a ForensX expert investigator today!
You are not alone and we are here to help you.
Come back next month to read Part 2, where we will explore a few more scams and discuss the best way to protect yourself and your crypto.
First there was gold. Then there were coins. Then came cash. Oh, and there were also cheques, wire transfers, and e-transfers — you catch the drift.
All these have long served as tools for purchasing and storing value.
But with the popularity of the internet and our lives moving online, currency began moving toward a more digital existence, too.
That gave birth to cryptocurrency aka crypto.
Crypto existed before it was made most recognizable by the popular Bitcoin. The digital currency trend became popular in the late 2000s. It’s taken more than two decades to evolve into what it’s become today: an alternative to traditional currencies that need middlemen and are regulated by governments.
When crypto burst onto the scene, its main selling feature was anonymity. This sold the concept of the digital currency to people that wanted to make transactions without any government interference. Using crypto, they could avoid a centralized system, too.
Cash and other currencies issued by the central bank of a country can effectively be traced back to a source. We’ve all seen the Hollywood movie that uses marked banknotes to trap the criminals.
But crypto, it was thought, wasn’t traceable. And it wasn’t, until it was.
Crypto was considered an evolutionary form of cash that would free people to make transactions anywhere in the world without having to go through a money centralized exchange, like a bank..
Simply put, it’s a digital currency, which uses encrypted algorithms to enable transactions between users or sets of users, minus an intermediary, such as a bank.
As the name indicates, all transactions made using crypto are highly encrypted. These digital currencies are stored in digital wallets that can be accessed using a private key.
This feature was touted to make crypto highly secure. But before a cryptocurrency gets to the wallet, it’s part of a larger gathering point called a ledger. The ledger is decentralized; meaning, everyone has a copy, and everyone can see what happened, so no need for a bank to track it all. The blockchain takes care of that.
Every new digital coin is created through a process called mining. This is also the method that verifies each (new and old) digital coin and transaction on the ledger.
Mining leads to creating a blockchain that lays out the path for each exchange.
Each blockchain contains:
To receive or send coins, a user must obtain a bitcoin address, which comes as a string of up to 35 alphanumeric characters or a QR code — the address doesn’t use any names, locations, or other personal identifying data. The technical term for such an address is a ‘public key.’
A wallet contains a collection of such keys that are derived from the private key, which opens a single wallet. Public keys serve as one-time tokens for single blockchain transactions.
When making a transaction, users provide an address from their crypto wallet. They can sign all transactions using a private key and receive crypto using a public key.
The crypto anonymity got the attention of those that wanted to move large amounts of money without being traced.
After all, so many passwords needed to access and complete crypto transactions should make it untraceable, right?
Well, not really. There are still loopholes in the crypto world that have given authorities the ability to track and trace crypto interactions. But, it’s still not as fast of a process as it is with other forms of regulated payment methods.
As criminals shifted their attention toward crypto, so did authorities.
The anonymity and ability to get away with huge transactions and disappear into the night caught the attention of law enforcement. They began working on ways to follow the digital money. It’s been a complicated process, but they’ve figured out a way.
As time has passed, and authorities have caught up with what was happening behind the crypto scenes, the secrets to tracing the secretive currencies have also surfaced.
Shockingly enough, it turns out that what made crypto so safe and secure is the very feature that now makes it traceable.
Let’s step back and take a look at the picture together.
How do cops trace a currency that never changes hands?
Crypto wallets are locked away in vaults, accessible only to the one using a private key. There may be some items or services one can buy directly using crypto. But in a majority of cases, the digital currency needs to be exchanged into a local currency if someone wants to actually spend it.
To exchange crypto for dollars, or another currency, you need a company on the ground that processes such transactions.
Such companies will generally ask for customer identity verification. That takes away the anonymity of owning or using a cryptocurrency.
These not so secretive middlemen can be the key that opens the doors to the crypto vault for authorities. Cryptocurrencies do not intrinsically require an ID to be attached to a wallet. But crypto exchanges, aka virtual asset service providers (VASPs) require the use of a ‘know your customer’ (KYC) ID before any transactions can be done.
Crypto exchanges themselves are not linked to any particular wallet identity, but they have records of all identities and wallets from where the crypto comes. And that’s how converting crypto into a regulated currency creates a distinct trail that authorities can follow.
Moreover, the digital ledger used to store and record transactions includes minute details, such as the amount, time, the wallet the money was sent from, and the wallet that received the money.
If you have a crypto wallet, it can sit anonymously and hidden if unused. But the second you use it to receive or send money, the KYC ID can open the door to law enforcement agencies. And they can identify both the receiver and the sender.
Theoretically, law enforcement could also subpoena a crypto exchange and have them give up user information instead of searching for it quietly.
This is a tedious and lengthy method that can take several yearstime because it requires watching and studying the patterns behind all the transactions.
Crypto research demonstrates that transactional data leaves unintentional patterns that can reveal the identity of digital currency users, no matter what their intent.
Where no VASPs are used and the individual uses only their own wallets, the tracing process can get more difficult.
These aren’t the ones that decide which video you’re going to watch next on TikTok or YouTube, but they’re the types that analyze blockchain money flow analysis.
This sophisticated software takes tons and tons of complicated blockchain data and painfully and painstakingly analyzes it bit by bit.
Remember the blockchain that recorded all crypto transactions? Well, that blockchain is generally public. And typically, each currency has its own blockchain website that is open for anyone to access using the currency’s browser.
Agencies that specialize in tracing cryptocurrencies can use these browsers to go after specific transactions or wallets. Investigators use the ‘crumbs’ of information crypto exchanges and wallets leave behind. Once a specific transaction has been found, the next step is to pinpoint its ID. Remember that long string of alphanumeric characters we mentioned? Yup, that’s what this ID is.
But tracing blockchains can have its hiccups, too. Sometimes, investigators may have to put in a large amount of work to gather information if the transactions are happening on darknet markets. Companies that specialize in tracing crypto, like ForensX, have the ability to identify dark web transactions and surface pertinent information on such transactions for your investigation.
Over time, companies that use some software can trace transactions back to a specific user — even if they’re using multiple wallets and addresses.
Another method is to use internet browser history of anyone making crypto transactions and then cross-referencing it with all the KYCs available from crypto exchanges.
Tracing and tracking crypto has its advantages and disadvantages. Primarily, for those that want to operate under the radar, it’s a huge negative that authorities are now starting to shine their lights on crypto. However, tracing can be useful for those that want to make money off crypto and keep their digital currencies safe from scammers and hackers.
If you’ve encountered a situation where you need to trace a Bitcoin or other cryptocurrency transaction and you need help, make sure you reach out to our team of expert investigators at ForensX.
This blog post will be a repository for any important articles we come across that are worth reading to learn more about cryptocurrencies and how to trace them.
If you know of a great article we should share, let us know in the comments below!
