When Erin West first learned about crypto, Santa Clara County’s assistant district attorney immediately had a gut feeling that the technology meant bad news for law enforcement.
“My first reaction was like, ‘Wow, this is going to be a game changer in terms of the ways bad guys can move money,'” she told The Examiner.
Formed in the 1990s in response to the rise of internet crime, REACT is now taking on a new wave of cybercrime based on a new technology, crypto.
West has become one of the most visible figures in the law enforcement campaign against crypto-related crimes. “There was a lot of money in crypto and there were some really bad actors trying to go after it,” West said.
In an interview with The Examiner, West talked about how she got involved in the fight against cryptocrime and what has become her obsession with stopping scams, scams that involve luring victims into making significant crypto investments and then stealing the funds.
This interview has been edited for clarity and brevity.
Interviewer: How did you first hear about bitcoin and crypto?
I’ve been a prosecutor for 25 years and six years ago I was assigned to this high tech team called REACT. It is a multi-jurisdictional task force made up of officers specially trained in high-tech crime.
In March 2018, we received a case involving a local victim, a Cupertino resident, who said, “My phone service has been removed. I don’t have access to my phone. This bad actor has taken over my Facebook, Twitter and cryptocurrency account.”
It was the first time we had dealt with any kind of cryptocurrency matters at all. We are not at all aware of a situation where a fraudster could take over your phone service.
We began to investigate and we were fortunate in that we had an officer in our agency who had been trained in cryptocurrency in Washington DC. He thought, “OK, well, why can’t we track this cryptocurrency and see where it ended up.”
The victim was able to give us IP addresses that were connected to his phone and we traced them and they were done through the VPN so it didn’t work.
We were finally able to solve the case by checking the phone records. It was the first SIM exchange case we became aware of. From there, over the next year and a half, we did a bunch of SIM swapping cases involving cryptocurrency. So we quickly got down to business tracking cryptocurrency and getting cryptocurrency back into the hands of victims.
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Can you walk me through the crypto element of the scam?
Let’s say you are an investor. Back then a lot of people were talking on Twitter and they were hashtag crypto this, crypto that. So it wasn’t that hard to figure out who could have cryptocurrency.
These scammers were usually groups of young men. They operated late at night from their parents’ basements. They knew each other through their online handles, not in person. They would operate in loosely formed groups. They wanted to make target lists. They go after Ben Pimentel who they know is an investor. They have researched you. They have your mobile number. They probably found out some of your other addresses. They know your Facebook and your Twitter.
You go to bed on a Friday night like a normal person. We are still up. We call AT&T and we get them to switch incoming traffic to your phone to the device I’m holding.
They are essentially tricking someone into making this transition.
It happens in different ways. It is done with tricks. It is done by bribery. It is done by actual hacking. The result is that your phone traffic comes to a device I kept.
Then I would go to (your email account). I want to say that I have forgotten my password (and will get) a six digit code for the device I am holding. Now I’m in your Gmail account. I’m going to change your password and now you’re locked out of your Gmail account. Now I find that you have an email from Coinbase or you have an email from Gemini. It must be where you keep your crypto. Then I go to Coinbase or Gemini. I do the same process. I’m taking over that account. And then I send the money to a wallet.
The reason crypto mattered is because at the time they could transfer it to a cold wallet and no one would know who it was. And it is irreversible and (the funds) would be gone. So you wake up the next morning and you have no phone access and you’ve lost $1 million. It’s a complete change in the way fraud can be done on a massive scale because never before could I steal all your money overnight. I can never access your bank account the way I could access your cryptocurrency
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Tell me about your very first reaction to bitcoin, e.gockchain and decentralized finance.
I think my first reaction was like, “Wow, this is going to be a game changer in terms of the ways bad guys can move money.” It was felt at the time that there was such an interest in Silicon Valley with people who like to get into crypto and want to be early crypto investors. It felt like there was a lot of money in crypto and there were some really bad actors trying to go after it.
How is it different from traditional fraud? What made it more challenging?
A couple of things. (One is) its jurisdictional nature. When I think that someone could steal that amount of money, I think that someone has to be close to the person and then this actually happens in my jurisdiction.
But what we found is that these fraudsters lived all over the country, many outside the country. A real barrier for us was that several of them were young people. The laws do not really enable us to prosecute juveniles as we do adults despite the fact that they caused massive harm.
What stood out to you about the role you play in this?
What stood out and continues to stand out is being on the edge of something new and scary, and we did things that had never been done before. We used laws in a way that had never been used before, and we tried to adapt existing laws to a completely new technology.
Can you elaborate on that?
It was a very steep learning curve for everyone involved in these matters. The first time I walked into a courthouse and asked a judge to take one of these hackers into custody, we had arrested in the state of Oklahoma and brought this person to California. “I remember a very respected but kind of aging lawyer, who was the defense lawyer, saying things like, ‘This is fun money anyway. This isn’t even real money.” Trying to educate the judges that this was very real and could be exchanged for a McLaren or diamond chain was an initial challenge.
The cases you mentioned happened in 2018-2019. How have the criminal cases you deal with changed?
We see new crimes, new methods of fraud. For the past year we have been deeply involved in a major worldwide issue called pig slaughter. It starts as a romance scam. A victim is led to invest money. The investment opportunity is completely fraudulent and non-existent, and the scammers continue to trick the victim into putting money into it. Ultimately, they lose all their money.
(Pig slaughter) is exponentially more dangerous because it combines two human desires at the same time: the desire for companionship and love and to have a reliable partner at the same time. It satisfies the desire to be prosperous, self-sufficient, financially stable.
The way this scam works is that the scammer spends a significant amount of time cultivating that trusting relationship and really building that connection that enables the amount of trust needed when a victim is asked to put everything they have into this. So what happens is, you know, the scam starts small and they ask for just a few thousand dollars. But the more they get to know the victim, the more they know how many assets they have.
What is happening here is that these victims are seeing completely falsified returns. And they think they are in good shape. So they liquidate the 401(k), liquidate the kids’ college accounts. They get full lines of credit on their house. They call their friends and family and get them to invest. We see people literally putting every penny they have into this scam.
I was fascinated by this particular type of crime. So I started doing a lot of research on it. It became clear that this crime itself occurred in Southeast Asia. It does not necessarily scare us because we have made arrests in Malta. We have been involved in arrests in the UK. We are familiar with how to work internationally.
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What has been the effect of crypto crash that escalated with crypto-related crimes in the FTX meltdown?
I would say that despite the recent failures we have seen in the crypto world, there will be no stopping the use of the blockchain by bad actors. This is how bad actors are going to move money. This is the way they will move money to bad governments, buy weapons or move money on human trafficking. This is how bad money is going to be moved.
Given the state of the industry, there have been reports that crypto crime actually dropped slightly due to the market crash.
God, that’s not my experience.
I can tell you that pig slaughter is not to be overlooked. What is happening in Southeast Asia is a huge tsunami that we have not even begun to see the end of. It bankrupts household by household across much of the world, resulting in suicide.
We had a test case, and it was a man who came to us in May last year. He was an engineer. He lost $240,000. We found a wallet that had it. On December 16th, a judge allowed us to return the contents of that wallet to him. So that was the success story.
What I found was that very few people in law enforcement in the US knew how to handle any kind of cryptocurrency cases. I started something I call the Crypto Coalition and a listserv. About every three weeks we have a webinar.
We’ve had experts who can teach law enforcement how to create a government wallet, how to do tracking, how to get it back to victims. And we try to learn it step by step. The reception to this coalition has been unprecedented. We are up to 600 members, and they are from all over the world and from all over the United States. We developed a really excellent way of communicating the work we had all done and helping each other.
Is there a particular case or victim whose story resonates with you?
There was a victim who lost a million and a half dollars, which is the family’s life savings. I have read texts between him and the scammer and they are gut wrenching because it just shows the absolute callousness of these people on the other end of the phone. The victim would write to them and share information about his dying father and the stress he felt having to be one of his siblings to take care of his father. Then he would reach out to this scammer who he thought was a very close, trusted friend and say things like, “Are you sure these crypto tips you’re giving me are good? If they are not good, I will kill myself in secret.” And (the answer was) “No, I assure you that this is all that is true.”
Reading these stories is terrifying. We were able to recover $103,000 for him, which was a great deal. He thought for a long time that there was nothing left and that he could not get anything back.
What are you most worried about?
I am terrified that this fraud will be allowed to continue in lawless situations internationally where we will not be able to handcuff people and make this stop.
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