Until fairly recently, cryptocurrency was a concept very much confined to the realms of online traders, hackers and other digital enthusiasts. Now it seems that everyone is crypto-crazy…
No longer is the idea of virtual and digital money considered to be a hare-brained idea dreamt up by somebody on the internet. Instead, the back end of 2017 saw cryptocurrencies, and the inevitable criminal opportunities linked to them, go mainstream.
A busy coffee shop in Northern England. A young man and his fiancée nervously take a seat, looking for the person they have arranged to meet. Before long, a middle-aged man joins them, placing a rucksack on the seat beside him. The bag contains £40,000 in cash.
The two parties met online where the older man agreed to buy £40,000 worth of Bitcoin from the younger. They agreed it would be bought in cash. The seller has owned his bitcoin since they were worth just a few pence and now is able to sell them for a significant profit. He hopes to use it as a deposit to buy a house for himself and his expectant partner.
Put off by stories of money being lost through online exchanges, the seller has used a legitimate peer-to-peer exchange to agree the deal. The buyer has told him that he wants to invest in the growing technology, and the best exchange rate for him is by making a cash purchase.
Over a coffee, the younger man checks that the money in the rucksack. It appears to be real and he counts the bundles. Then by using an app on his phone he sends his bitcoin to an address displayed on the buyer’s phone.
Within seconds the transfer is done. The buyer gets a notification telling him he has received payment to his virtual wallet and that the transaction is now completely irreversible.
With the transfer complete, the older man stands to leave and to the couple’s surprise he picks up his rucksack. “I’ll be keeping this too”, he calmly states, and hurries out of the shop into the passing crowds. The sellers, who are now victims, are law-abiding and non-confrontational people.
They have no idea what to do. They try to follow the man but he has disappeared.
They call the police in the hope that they will retrieve their money…
This is not a far-fetched story. Incidents like this have been reported in the UK and worldwide, with the policing response varying from one case to the next.
The question here is not ‘Could this really happen?’, but needs to be ‘What happens next?’.
– Does the police call taker know enough to assess the seriousness of the call?
– Is the first responder to the incident equipped to ask the right questions?
– Do investigators have the knowledge and tools to uncover leads and trace the offenders?
– Does the criminal justice system as a whole have sufficient understanding to successfully prosecute offenders and support victims?
In cases like this, a detective armed with the right skills may be able to ‘follow the money’, and identify lines of enquiry that could identify the offender. The transaction itself will be forever irreversible – such is the nature of Bitcoin – but that’s not to say the money can never be recovered.
Cryptocurrency is anything but straightforward to investigate, but it should never be a lack of knowledge that stands in the way of a complex investigation.
Why is this important now?
The explosion in interest in Bitcoin was no doubt triggered by its exponential growth in price during 2017. While its use as a functioning currency is currently limited by several factors, for most people it is its potential as an investment that holds appeal.
With the price of one Bitcoin going from around £300 at the beginning of 2016, to just under £15,000 by mid-December 2017, everyone seems to have a friend-of-a-friend who had made life-changing amounts of money simply by being ‘in’ on the trend at the right time.
As the trading value increased, so did the media exposure. In offices, pubs, hair salons, gyms, people were talking about this latest invention that could make you rich. Online exchanges grew; ways to turn hard-earned cash into ‘magic internet money’ became easier and easier to access.
Now, you didn’t need to be a hacker to own crypto, you just needed a credit card and an internet connection – anyone could use it.
When Bitcoin was first released to the world in 2009, its tokens had no real-world value.
It wasn’t until May 2010, when a man named Laszlo Hanyecz indirectly purchased two pizzas for 10,000 bitcoins, that the world’s first Blockchain-based virtual currency became worth something tangible.
Since then, the value has taken a rollercoaster ride through several peaks and crashes: after reaching an all-time high of almost £15,000 in mid-December 2017, the market value of one bitcoin is currently sitting just below £8,000.
Crypto isn’t just cybercrime
For a while, cryptocurrency’s link to crime was mainly just a problem for cybercrime units in law enforcement. They often dealt with companies who were blackmailed, faced with online attacks against their systems unless they paid a ‘fine’ in Bitcoin. Increasingly, computer ransomware began to use automated processes to demand and collect payments from victims using cryptocurrency.
As the recent boom continues to make cryptocurrency more and more accessible to everyone, its relevance to traditional, non-cyber crime becomes evermore pressing…
– Why hoard drug money in a holdall in the wardrobe, when it can instead be converted into cryptocurrency and effectively stored on a device the size of a USB stick?
– Why run the risk of collecting a kidnap ransom in used banknotes when you can receive payment using the blockchain?
– Why trust a third party to safely move a suitcase of ill-gotten money out of the country when you can achieve the same result using an app on your phone?
Exactly one week ago a Bitcoin trader was robbed at gunpoint at his home in Oxfordshire.
His wife was tied up and their baby was removed from the house during the terrifying ordeal.
However, it wasn’t the family jewellery or the cash in the safe that was stolen – instead, the offenders forced the victim to transfer his cryptocurrency to them before fleeing the scene.
Perhaps the first in a new wave of CryptoCurrency offences…?
Crypto… Here to stay?
The surge in the popularity of cryptocurrency has created a huge number of people seeking to pounce upon the opportunity to make ‘easy’ money – and as any seasoned scam artist will tell you, the people desperate to make easy money are often the easiest to rip off.
Combine this with the fact that cryptocurrency isn’t always straightforward to acquire, especially for technophobes, and the result is numerous fraudulent operations are cropping up: fake syndicate-buying schemes; Ponzi schemes in disguise; straight-up bogus exchanges; malicious apps that will steal cryptocurrency by infecting the victim’s mobile phone.
If you were faced with investigating the case described at the start of this article, would you know where to begin?
If you were the financial investigator for an organised crime gang using cryptocurrency, would you have the knowledge and the tools to gather the evidence? If your job is in crime prevention, would you be able to accurately advise people on how to avoid being a victim when it comes to virtual currency?
As stated before, although it has been around for several years, cryptocurrency is a technology still in its infancy. It is here to stay, and will continue to grow over the coming years. Like the internet itself, there will come a time with cryptocurrency where it will be unusual to find someone who doesn’t use it in one way or another.
As investigators, whether our job involves computer hacking, armed robberies, or financial fraud, we need to stay ahead of the curve so that we don’t find ourselves adrift as our cases increasingly touch upon the world of crypto.
Cryptocurrency can be intimidating to those with no experience of it, but the information is out there and becoming more and more imperative to access.
Do you want to know more about cryptocurrency and the investigative opportunities it presents?
Find out more about our groundbreaking Accredited CryptoCurrency Investigator Course or contact the team to discuss your requirements below.