In the early months of 2022, an overnight theft of US $326million of Ethereum made headlines. The crypto market has evolved in the past few years, which in turn led to an increase in the number of hackers, scams, and theft of crypto tokens.
A post regarding the lack of support people receives when their coins are stolen, attracted many intrepid investors, one of them commenting that they never tried contacting any authority to get reported on the issue.
Experts report that there is more than ten billion dollars worth of crypto stolen in the market. In 2021, Chainalysis reported the theft of $3.2billion. Crypto criminals are increasing in number, especially after the currency started gaining popularity.
However, with the advancing technology, officers can encrypt the system and trace the tokens being transferred between online wallets. It is still not possible to track the stolen tokens, however, experts can track trader behaviour to freeze the assets.
Earlier, the majority of stolen crypto tokens were not reported. It was because people did not know to whom to complain. However, in recent times, with the popularity of cryptocurrency, cyber security is taking measures to track stolen crypto coins.
Cryptocurrency is based on blockchain technology. Since it’s a decentralized technology, it is almost impossible to poke a hole in the chain. Crypto enables people to receive and send funds, by recording the transaction on a public ledger called a blockchain. It does not retain any information regarding the account holder.
Since there is no data on the user, it is considered the best place for hackers to commit criminal activities. Since the majority of the users are anonymous, the industry is a hub for tax evaders, hackers, and others to secretly steal money other than the traditional banking procedure.
To safeguard criminal activities with digital assets, blockchain investigators work in collaboration with law enforcement. Here are a few ways how investigating officers track stolen crypto.
Hacks, ransoms, drugs, and human trafficking are all different criminal activities that pass through complex layers and schemes to conceal the trace of funds. One such scheme is used by anonymizers who plan to create a complex track making it difficult for investigators to trace. The majority of the frauds divide the funds into small parts. These small transactions are mixed with the same size to different addresses.
However, some exchanges feature embedded anonymising protocols. According to Anti-Money Laundering Protocols, a mixing service may be illegal. However, this does not stop the hackers from stealing the money. Mixing crypto assets make it easier for criminals to hide their crime. The higher the fund, the more difficult it becomes to keep the transactions concealed. While blockchain technology is secure, it is also immutable and traceable.
Blockchain-based companies and frauds are in a technological race from the day investors started buying digital assets. However, today, various fraud detection engines allow investigators to encrypt complex layers. The method involves three different types of examinations, find source, destination, and fingerprints.
Poorly secured wallets allow hackers to steal funds. These platforms through which the crime is conducted is known as fund destination. The source on the other hand is through which the fund is distributed or the one used by the fraudster. These examinations are subsidized with different data mining techniques like clustering, e-discovery, and ownership analysis.
Other than the above-mentioned methods, investigators use bankruptcy laws as the first in, first out, (FIFO), Last in first out (LIFO), Lower Intermediate Balance Rule (LIBR), pro data distribution, and other methods improved for blockchain specifications. Verifying and preparing the traits with different procedures to make it affordable, and easy for court cases. Although the crimes are increasing, investigators and cybercrime cells are using new methods to track stolen coins.