With the advent of globalization and digitalization, the rapid development of the cryptocurrency market has brought new business opportunities, but also posed new challenges to laws and regulations around the world. The increasing interaction between cryptocurrencies and legal currencies has led to an increase in illegal activities such as money laundering and terrorist financing. At the same time, since blockchain technology is not the professional field of law enforcement agencies, it is difficult to locate specific criminals, and law enforcement agencies face greater challenges in combating these illegal activities. In addition, from multiple incidents, the regulation of cryptocurrencies requires not only the support of local laws, but also international cooperation to deal with cross-border crimes, money laundering, terrorist financing and other issues. Therefore, international cooperation in law enforcement and the use of blockchain data analysis technology will become a major trend in combating cryptocurrency crimes.
Cryptocurrency and criminal activity
According to CoinMarketCap, the global market value of cryptocurrencies has exceeded 2 trillion US dollars. Cryptocurrencies are becoming more and more popular. Their decentralization, anonymity and cross-border circulation capabilities bring many conveniences to users. However, these characteristics also make cryptocurrencies a tool for money laundering, terrorist financing and other illegal activities.
According to the SlowMist Blockchain Hack Archive (https://hacked.slowmist.io/), blockchain crimes have caused at least $33.4 billion in losses since 2012:
Cryptocurrency can be used for both payment and investment, and it is highly anonymous, which has led to a gradual increase in demand for cryptocurrencies by transnational organized crime groups (such as ransomware and terrorism). Simply put, cryptocurrencies have greatly reduced the operating costs of transnational organized crime. They not only use cryptocurrency arbitrage to obtain more funds, but also transfer huge amounts of money without arousing suspicion. For example, in order to circumvent regulatory measures implemented within the international banking system, some criminal organizations raise cryptocurrencies through online platforms that support anonymous donations. Previously, Interpol also disclosed information on organized crime groups using cryptocurrencies for large-scale money laundering activities. These cases all show that the characteristics of cryptocurrencies such as "virtual", "anonymous", "difficult to track" and "cross-border" make it difficult for a single country or region to effectively regulate them, bringing new challenges to law enforcement.
International law enforcement cooperation to combat cryptocurrency crime
To deal with the law enforcement challenges brought by cryptocurrencies, we believe that we need to rely on international cooperation to achieve effective supervision and law enforcement. Law enforcement agencies of various countries need to act together to deal with the ever-changing means and techniques of cryptocurrency crimes and achieve precise crackdowns on criminal activities. Several successful cases of international cooperation in the field of cryptocurrency have proven the necessity and effectiveness of this trend:
On August 20, 2024, with the cooperation of China and Thailand, the "Fox Hunting Operation" working group of the Ministry of Public Security of China successfully extradited economic crime suspect Zhang from Thailand. Zhang is suspected of organizing and leading pyramid selling activities. This case is the first economic crime suspect extradited from Thailand by China, marking a major progress in the law enforcement and judicial cooperation between China and Thailand. The group involved in Zhang's case carried out online pyramid selling activities by issuing virtual digital currency, involving more than 100 billion yuan and more than 10 million members.
In May 2024, French police, with the support of Eurojust and Europol, jointly arrested a suspect in Portugal, Germany, Italy and Romania. The suspect used a scam that caused Portuguese victims to lose 700,000 euros. The suspect approached the victims by expressing interest in acquiring a commercial enterprise, and after gaining the victims' trust and convincing them to install a crypto asset wallet, he stole the victims' funds.
On February 19, 2024, the website of the notorious extortion gang LockBit was seized in a joint law enforcement operation by the UK National Crime Agency, the US FBI, Europol and an international alliance of police agencies.
In 2022, the law enforcement operation codenamed "HAECHI III" seized a total of $130 million in illegal cryptocurrency proceeds. A total of police units from 30 countries and regions joined in the cooperation and arrested nearly 1,000 cybercriminals. Interpol also blocked nearly 2,800 bank and crypto asset accounts used for crimes, including pig-killing scams, investment fraud, online gambling, and transnational money laundering.
DarkMarket is one of the world's largest dark web markets, mainly conducting illegal transactions through Bitcoin and Monero. In January 2021, German police, together with law enforcement agencies from 15 countries including the United States, the United Kingdom, Denmark and Switzerland, successfully shut down DarkMarket, arrested the main suspect, and froze millions of dollars in virtual assets.
The above cases all demonstrate the importance of international cooperation and targeted technical support. Regardless of where the illegal profits are made, international cooperation can effectively reduce the risk of using cryptocurrencies for illegal activities by achieving asset recovery and combating crime.
The role of blockchain technology in combating cryptocurrency crime
In addition to international cooperation, making full use of blockchain technology is also very important in combating cryptocurrency crimes. Blockchain itself is a highly transparent and traceable distributed ledger, which means that advanced analytical tools and machine learning algorithms can be used to track transaction activities in real time and identify abnormal transaction patterns, thereby effectively combating money laundering and other illegal transactions.
For example, professional blockchain companies can prevent, identify and track cryptocurrency-related money laundering crimes by analyzing the large amounts of data they have, using technology as an important aid in preventing cryptocurrency crimes and investigations. In addition, although the transaction data on the chain is open and transparent, its anonymity and decentralization make it very difficult to directly link on-chain behavior to specific individuals. This requires law enforcement agencies to have the corresponding technical knowledge to effectively identify and collect evidence and seize illegal proceeds, which is inseparable from professional on-chain tracking and investigation training. In this context, blockchain security and compliance solutions such as SlowMist AML (https://aml.slowmist.com) play a vital role in helping to discover, analyze on-chain risks and prevent cryptocurrency-related crimes.
Key highlights
1. Compliance: SlowMist AML can identify risks for all wallet addresses and counterparty addresses within the customer's business system; help customers avoid any possible connection with financial crimes or sanctioned entities in a timely manner, actively cooperate with and meet regulatory requirements; with the help of SlowMist InMist Lab threat intelligence cooperation network, customers can be the first to grasp the latest global hacking incidents and regulatory trends, and make effective responses.
2. Investigation: SlowMist AML provides 24-hour emergency response to theft incidents, analyzes, tracks and intercepts funds; outputs hacker portraits by investigating any traces or information left by hackers, especially account information on centralized exchanges, OTC platforms and wallet apps; monitors and blacklists the addresses where funds stay, intercepts funds; tries to talk to hackers, and uses a variety of methods to try to get hackers to return the stolen funds. With the strong support of the SlowMist InMist Lab threat intelligence cooperation network, in the first half of 2024, SlowMist assisted customers, partners and public hacking incidents to freeze funds of approximately US$24.39 million.
3. Data: SlowMist, as an industry-leading blockchain security company, has been deeply involved in threat intelligence for many years and has built a solid threat intelligence cooperation network worldwide. In addition, SlowMist AML also uses artificial intelligence technology combined with blockchain big data to achieve continuous accumulation of on-chain and off-chain label data. It has currently accumulated more than 300 million address entity labels, covering more than 1,000 project entities, 500,000+ threat intelligence data, and 90 million+ risk addresses.
Typical Cases
The following are some cases where SlowMist AML and global law enforcement have collaborated to recover stolen/fraudulent assets:
Assisted the Chinese mainland police in solving a theft case with a loss of more than 2.7 million US dollars: In 2024, a user in mainland China had his cryptocurrency stolen, with a loss of more than 2.7 million US dollars. Through the close cooperation and technical support of the Chinese mainland police and SlowMist, the suspect was eventually arrested, and all the stolen assets were recovered and returned to the stolen user.
Assisted the US police to freeze more than $1.2 million: In 2024, a US-based company suffered a cryptocurrency theft, with losses exceeding $1.2 million. With the technical assistance of SlowMist, the US police immediately contacted the relevant platform to freeze the funds, thus preventing the stolen assets from being transferred and laundered by criminals.
Assisting the Taiwan police in cracking a fraud case: In 2024, the SlowMist AML team assisted the Taiwan Criminal Police Bureau, the Civil Justice Reform Foundation and the XREX trading platform to successfully crack a cryptocurrency fraud case. This case may be the first case in Taiwan's judicial history to use advanced blockchain tracking technology to prove the flow of illegal funds and the owner of cryptocurrency assets without specific information about the suspect and the identity of the defendant, and to assist law enforcement agencies in freezing and seizing, and ultimately returning the funds to the victims.
Assisting the Vietnamese police to recover some of the defrauded assets: In 2024, a user was defrauded after entering a mnemonic on a fraudulent website, and lost more than 1.2 million US dollars. SlowMist provided on-chain technical assistance and contacted the exchange to freeze the funds. With the joint efforts of the Vietnamese police, it finally assisted the victim to recover more than 60% of the defrauded assets.
Assisting the Hong Kong police in investigating several cryptocurrency crime cases: In 2024, SlowMist assisted the Hong Kong police in analyzing and investigating several criminal cases involving cryptocurrencies, helping to identify and analyze clues related to cryptocurrency wallets and trading platforms, and provided great assistance in solving related cases.
Assisted the Singapore police in solving a theft case with a loss of more than 1.7 million US dollars: In 2023, a user's cryptocurrency wallet was stolen while in Singapore, with a loss of more than 1.7 million US dollars. SlowMist located the hacker's portrait and location through technical analysis, assisted the stolen user and the Singapore police to successfully identify the suspect and recover all the stolen assets.
Assisted the Ukrainian police to freeze and recover over $250,000: In 2022, a company suffered a hacker attack and lost nearly $500,000. SlowMist froze and recovered over $250,000 worth of ETH through on-chain technical assistance and contact with relevant exchanges.
Assisted Canadian police in solving a home robbery: In 2022, a user was robbed in Canada and lost more than 10 million US dollars in cryptocurrency. Combined with SlowMist's technical support, the Canadian police eventually helped the victim freeze and recover more than 60% of the robbed assets and arrested several suspects.
In addition, SlowMist AML also conducts on-chain investigation training for financial institutions/law enforcement agencies. For example, SlowMist was previously invited to conduct training on cryptocurrency illegal funds tracking for the Hong Kong Police Cyber Security and Technology Crime Bureau (CSTCB); was invited to participate in the CCTC Conference (Technical Innovation Conference on Combating Cybercrime) and delivered a speech on "Cryptocurrency Analysis and Tracking"; was invited to share blockchain technology and attack and defense confrontation for the network security training class; was invited to give blockchain security attack and defense lectures at the People's Public Security University of China, etc.
Final Thoughts
As the global digital economy continues to develop, cryptocurrencies play an increasingly important role in the financial system, and related regulatory issues are becoming increasingly complex. We can foresee that international cooperation will become more frequent and in-depth in the field of cryptocurrency, covering all aspects of cryptocurrency regulation and law enforcement. We believe that through this collaboration, the world will be better able to respond to new challenges brought by cryptocurrencies, help combat illegal activities and maintain market order, and ensure the security and stability of the financial system. SlowMist will also continue to work hard to build a safer blockchain ecosystem.
