Virtual Currency, the Piggy Bank of the U.S. Government

In recent years, virtual currency trading hype activities such as Bitcoin have risen, disrupting economic and financial order, and breeding illegal and criminal activities such as money laundering, illegal fund-raising, fraud, and pyramid schemes. Our country strictly prohibits such transactions as illegal financial activities and resolutely bans them in accordance with the law. The regulatory policy on virtual currencies is clear and consistent. Any legal person, unincorporated organization or natural person investing in virtual currency and related derivatives violates public order and good customs If the relevant civil legal act is invalid, the resulting loss shall be borne by itself; if it is suspected of disrupting financial order and endangering financial security, relevant departments shall investigate and deal with it according to law.

For the national policy, for the industry, it has played a very good role in regulating. Otherwise, ordinary people like us, being cheated and scolded by others, really have nowhere to cry. This article is only used as a review and analysis of the blockchain industry, not as any investment intention or suggestion.

This self-proclaimed "professor" Zhai Shanying, who is the only one in China who really understands finance, recently appeared on the Internet and said "heartfelt words" to those who have been deceived by him. For example, all financial people are liars; I am very happy to be a liar ;Only a wise man can deceive a fool, never have a fool deceive a wise man.

This makes us ordinary people, how can we bear it. So looking back, the country is not afraid of you speculating in coins, but afraid that you will be cheated and scolded by liars. Who can stand this? With policy restrictions, the possibility of being cheated is greatly reduced. According to a set of data from the US Internal Revenue Service, last year alone, 3.5 billion US dollars in cryptocurrency fraud was seized, of which more than 600 million US dollars were targeted at Bitcoin fraud.

Today we will discuss and discuss how the US government handles cryptocurrency when it is stolen.

Cryptocurrency fraud cases have been increasing, and the amount is getting bigger and bigger, and all kinds of criminal methods emerge in an endless stream, making headlines in major media, such as organized crime, cybersecurity crime, and hacker crime, etc. wait. Among them, in the most notable case, according to the U.S. government, a hacker team operated by the North Korean government hacked RoninNetwork’s cryptocurrency platform in March this year, stealing about $620 million worth of ETH from it.

So what happens next for these stolen cryptocurrencies?

What Happens When Cryptocurrency Is Stolen

Those skilled criminals will launder these dirty money from unclean sources. Last year, more than $8.6 billion in dirty money was laundered through cryptocurrencies, according to an IRS report. In this regard, the US Internal Revenue Service specializes in cryptocurrency cases, Chris said, "Money laundering is even more complicated than currency hacking itself."

In the case of the North Korean hackers mentioned above, the U.S. government has stated that North Korea uses the theft of cryptocurrencies as a means to fund its financial isolation regime, while they use cryptocurrencies to bypass restrictions imposed on them and pay for everything from weapons to luxury goods. cost of.

Through the theft by North Korean hackers this time, we not only saw the upgrade of cryptocurrency fraud methods, but also let us see the evolution of cryptocurrency Q laundering technology. For example, PeelChain confuses origin and destination by moving cryptocurrencies through thousands of transactions. After that, use ChainHopping technology to cross blockchains and currencies. Finally, Cryptocurrency Mixers (CryptocurrencyMixers) take transactions from everyone and pay in different wallets or even different currencies in an attempt to sever deposits and withdrawals. All this was done to get rid of law enforcement.

How to trace lost funds?

The U.S. government has invested heavily in blockchain monitoring and analysis tools.

At the same time, on-chain analysis tools such as Chainalysis, TRMLabs and other companies' software are also used to help track and analyze the cryptocurrency ecosystem. Moreover, the government has acquired a large number of analysis tools for this emerging industry, only to expose the behavior of hackers stealing, money laundering and illegal cashing out of cryptocurrencies.

For example, one of TRM's products can track cryptocurrency transaction records in 26 different blockchains, map the flow of funds, and finally identify the wallet where the coins are stored. Similarly, a certain product of Chainalysis can monitor the sustainability of different encrypted currency assets. By cooperating with these companies, the US government can easily know the attributes of a specific wallet, such as whether it comes from a darknet market or an online casino, etc. .

However, no matter how powerful the software is, it can only play an auxiliary role, and cannot recover funds through the software.

How did the government confiscate the money?

Basically, the U.S. government legally acquires and seizes cryptocurrency funds in the following ways.

The largest single seizure in U.S. history occurred this year, with the Justice Department seizing $3.6 billion in cryptocurrencies that were reportedly stolen during the hack of virtual currency exchange Bitfinex in 2016. It was relatively easy for the American police to track down this case, because the two suspects were Americans and were arrested in Manhattan.

Afterwards, the police analyzed tools and found that the two suspects laundered money for a long time but failed, and finally transferred the stolen money to an account they controlled and were discovered. The police immediately obtained a search warrant for the suspect's storage account, which was found to contain 2,000 cryptocurrency addresses and private keys. Almost every wallet was directly related to the Bitfinex hacker. Finally, law enforcement agencies arrested two suspects and transferred the money to them. owned by the government.

Exchange cooperation

It is strictly prohibited in our country to speculate in coins, but many foreign countries have ambiguous attitudes and even accept virtual currencies. The US government is one of them. Therefore, after years of policy changes, exchanges and other cryptocurrency businesses have become To become more in line with the requirements of Western law enforcement agencies, in other words, to be more precise in the future.

In the example above, after all proof requirements are met, law enforcement can obtain a seizure of any illicit funds on a compliant exchange. Law enforcement would then work with crypto businesses to transfer funds to government-controlled wallets or freeze them. Have you seen it clearly? In the end, it will be transferred to a wallet controlled by the government reasonably and legally. Everyone knows what this means.

exchange of political interests

The former assistant director of the FBI once said that private keys can be provided to the government through the cooperation of adversaries or their internal members, which can be used as part of plea negotiations or cooperation to obtain some kind of benefit.

In other countries that accept virtual currencies, we will work together to track virtual currency scams from regulatory, political, economic and diplomatic cooperation. For hackers outside the United States, apprehending the suspect is extremely difficult if the suspect is in a country that does not cooperate with Washington, often making the task even trickier because of the wide-ranging implications. We often think that in a country as big as the United States, there will be people who oppose cooperation. In fact, there are, for example, Iran and North Korea do not abide by international anti-money laundering rules.

write at the end

According to a recent report by Chainalysis, cryptocurrency mixers are averaging more than $50 million in transactions per month, double what they were last year. As governments get better at monitoring and seizing cryptocurrencies, so do hacking and criminal methods. Strategies for tracking, freezing and seizing funds will only grow in importance.

At the same time, the government must also work hard to speed up the process of the industry framework from a regulatory perspective, and establish a wide range of standards and procedures around cryptocurrencies, so that consumers can be well protected.