In July 2021, Manchester police officers launched an international cryptocurrency scam, seizing USB sticks and an online safe containing digital coins worth 16 million pounds, mostly ethereum.
A month earlier, Leicestershire police seized 10 types of cryptocurrency after breaking into the home of a drug dealer who used digital assets to buy and sell Class A drugs.
Both operations pale in comparison to the record 180 million pounds of cryptocurrency retrieved by the Sofia police that year. But all three, and many more, are part of a spreading cryptocurrency wave announced today by a series of demands for freedom of information.
The Observer requested data from 45 regional police services in the UK with a request to break down the seizures of cryptocurrencies from 2017. The information sent back by the 27 responding forces reveals a big change: there is a significant increase in the number of attacks, and the proliferation of the types of digital coins that criminals use to invest their income.
More than half of the responding forces seized crypto assets in 2021, confiscating or restricting access to 22 different types of digital currencies. This was a significant increase compared to 2020, when four types of cryptocurrency were seized from eight police services. The figure was even lower in 2019, when only two types of digital currency were seized.
While the most famous digital currencies, such as bitcoin and etherium, are more common than any other, the figures reveal the growing popularity among convicted and suspected criminals of much lesser-known rivals.
“Bitcoin is still key: it’s digital gold,” said Gurveis Grieg, who spent 23 years at the FBI and now works as chief technology officer at consulting firm Chainalysis, which helps private companies and law enforcement monitor the movement of cryptocurrencies. You have seen this emergence of ethereum, “stable coins” [cryptocurrencies pinned to a real-world asset] and a much more diverse market. As a result, you will find more of these currencies in the pockets of criminals because they take them from people. “
In the Leicestershire case, asset police have emerged, including Enjin Coin, Polkadot, Neo and even Chiliz, crypto-tokens sold to football fans to give them access to bonuses and vote for decisions at their clubs.
In Wales, the South Wales Regional Organized Crime Unit confiscated eight crypto assets, including one called Cake, while its South West counterpart confiscated seven, including the Luxury Coin.
“This is an emerging area that is hitting us like a tidal wave, and the police need to adapt to the times,” said Phil Aris, who is coordinating the national police response to cryptocurrencies.
“It’s a big learning curve, but we’re doing well.”
He says 300 police officers have been trained in crypto, and hundreds more need to be instructed. But the scope of the challenge is even greater than outlined by Observer’s demands for freedom of information.
Although some services did not seize them themselves, “most are involved in investigations,” he said, with officers working on cases involving between 35 and 40 types of coins.
“These are not just investments and thefts, in some extreme cases they are also terrorist financing. This can be buying images of child abuse, money laundering. “We see a huge range of cases in law enforcement,” he said.
Most police services do not disclose the amount of cryptocurrency involved for fear that other bad actors, armed with such detailed details, may notice when confiscations have taken place. Leicestershire police said they could give them a “warning” for an investigation that could affect them, allowing them to take steps to hide ill-gotten gains.
However, Dyfed-Powys police, which patrol mainly in rural areas, where Llanelli is the largest city, told the Observer that they seized 82 bitcoins in 2021 worth £ 2.5 million at the latest price. .
When police confiscate such digital assets, they are not well equipped to store them themselves. Instead, Avon and Somerset police explained, they hired a contract for the job, keeping the award “in a protective wallet with a third-party supplier.”
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They declined to name the participating companies, citing security reasons; there is a danger that cryptocurrency workers will be targeted. In 2017, Pavel Lerner, a UK-based stock exchange employee, was abducted by armed men carrying balaclavas in Ukraine. He was released only after a ransom was paid. Any police service that responded to FoI’s requests cited this case as a reason for not disclosing the holders of the seized cryptocurrencies.
“The incident above is not the only one of its kind,” Avon and Somerset police said. “As such, providing information to the general public about the volume of assets stored and where they are stored increases the risk of cyber attacks, internal threats and other hostile actions by those who may wish to infiltrate either the supplier or law enforcement.
In theory, the growing attraction of cryptocurrency to criminals is obvious. Large sums of money can be sent quickly across borders to jurisdictions that do not necessarily cooperate with UK law enforcement.
However, according to Grieg, criminals should not become overconfident. Transactions that take place in a blockchain are, by their nature, registered. This means that with the right time and resources, they can be tracked down and the perpetrators caught, long after the crimes have been committed.
In the dark network, mixing services are available that allow criminals to launder their cryptocurrencies, mixing them with other types of assets to disperse the paper trail and throw investigators out of their queue.
But Grieg says determined, well-trained investigators can still get there eventually. “Tracking tools are better and data availability is better,” he said.
The growing number of seizures in the UK is not just a reflection of more crime, he said, but also the growing ability of police officers to stop it. In addition, he points out, the legal crypto market has grown faster than the volume of crime-related transactions. Illegal crypto addresses received $ 14 billion in 2021, according to Chainalysis – a record amount, but the lowest for all time in terms of share of the total volume, only 0.15%.
Yet, as the crypto world expands rapidly, the law enforcement challenge will grow with it.
A separate freedom of disclosure shared with the Observer reveals a significant increase in reports of cryptocurrency fraud last year. According to City of London police, there were 9,607 such reports last year to the national fraud hotline, compared to 5,581 a year earlier and 3,558 in 2019. Disproportionate casualties are likely to be below 35 years and men report financial losses of more than £ 200 million.
David Gerard, author of Attack of the 50 Foot Blockchain, says more crypto means more crime. “More people are using things,” he said. “Nowadays, there are small coins known as shitcoins for everything.
“There will be a lot more scams because more people are advertising it. Times are tough, people are worried, so they are victims of false hopes and schemes to get rich quick. “
But Aris points out that the greater the public interest in cryptocurrency, the greater the awareness and understanding among police officers who try to prevent ordinary people from becoming victims.
“The [expansion] of crypto in the minds of the general public also affects the police. All you have to do is go to the tube and see the ads; crypto companies sponsor sports teams. On Crypto.com you have Matt Damon approving it.
“There is an awareness that penetrates in a sense the challenge [of training officers] it’s easier now than it used to be. “
Aris says British police are on track for now.
“We are in a good position compared to some partners in international law enforcement.
“The wheels of justice are turning slowly, so some of this good news hasn’t come out yet, but time will tell that we’re doing a very good job.”
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