Why Law Enforcement Agencies Struggle to Curb Crypto Fraud
A customer uses his mobile phone to pay with bitcoin at a coffee shop in central Athens, Greece, February 25, 2018. Greece’s bitcoin community has been growing in recent years, fueled by capital controls imposed on the traditional banking system since the summer of 2015, said users and investors to Xinhua, even as local authorities warn of the risks of cryptocurrencies. (Xinhua/Lefteris Partsalis).
Under the headline “Fraudsters in Paris,” an online sleuth known as ZachXBT published a blog in August detailing how a pair of youths stole millions worth of crypto-assets.
Much to his surprise, the French police announced last week that they had acted on his tip and charged five people.
It was the first time his investigation led to police action, ZachXBT told AFP, despite investigating crypto scams and thefts worth $250 million and chronicling them to his 300,000 Twitter followers.
One explanation for the lack of action is that low-level fraud is not a priority.
The authorities in the EU and the US, the leaders in crypto control, have relentlessly focused on aspects of cryptocrime related to terrorist financing, money laundering and sanctions.
Arrests have been rare at the federal level in the United States, with the Department of Justice’s specialized unit charging only eight suspects in the first half of 2022.
US federal agencies have often focused on headline suspects such as Heather Morgan, an amateur rapper nicknamed “Razzlekhan” who was charged with money laundering in February, and more recently reality TV star Kim Kardashian, who was fined in September for illegally promoting a cryptocurrency. .
Still, specialist crypto firm Chainalysis said more than $3.5 billion had been lost to fraud and hacks between January and July.
The sheer scale of crime is proving difficult for law enforcement agencies that already lack resources for financial crime.
Chainalysis is one of several firms rushing to fill the gap in expertise, selling its tools and services to agencies including the New York Police Department. Former New York Police Chief Terry Monahan told a recent Chainalysis event that before he stepped down in 2021, officers would deal with three cryptocurrency cases every day. But they had no way to investigate, so the cases would be closed.
“The victim had nowhere else to go,” he said, pointing out that federal agencies were only interested in cases worth millions.
AFP
