By Leeor Ben-Peretz, Chief Strategy Officer, Cellebrite
Cryptocurrency is getting plenty of press lately— good, bad, and ugly.
The good? The market for this class of digital currency is valued at around $1.3 trillion today. More businesses — from Home Depot to Microsoft to the Dallas Mavericks—are willing to except some form of cryptocurrency as payment for their goods and services. And investors, including hedge funds, have been enjoying some serious ROI on their risky bet that cryptocurrencies would skyrocket in value. There are also signs the first Bitcoin Exchange Traded Fund (ETF) may emerge sometime this year.
As for the bad and ugly? Let’s take the latter, first. The ugly is the extreme volatility of this rapidly growing and evolving market. Just look at what recent tweets from entrepreneur and CEO of Tesla, Elon Musk, have done to the valuation of cryptocurrencies Bitcoin and Dogecoin. (Consider that Bitcoin was worth just over $63,000 on April 14, 2021. By May 17, 2021, it was trading around $46,500.)
And the (very) bad spotlight on cryptocurrency is the fact that it’s a preferred form of payment for many criminal actors, from malicious hackers to terrorists. Oxford Academic cites $76 billion in illegal activity — drugs, human trafficking, weapon sales, money laundering, and more— involving cryptocurrencies. And New York Attorney General, Letitia James warns of huge scams on the horizon for crypto investors.
Cryptocurrency Struggles to Shake Shady Past
Ransomware operators, on the whole, still rely heavily on cryptocurrency to profit from their disruptive campaigns. Notably, the DarkSide ransomware gang made about $5 million in Bitcoin from their attack that led to a six-day shutdown of the Colonial Pipeline on the U.S. East Coast in May.
It was a short-lived win for the DarkSide hackers, though. Almost immediately after receiving payment, “the gang announced it was closing up shop after its servers were seized and someone drained the cryptocurrency from an account the group uses to pay affiliates,” according to KrebsonSecurity.
Perpetrators of off-line crime find cryptocurrency appealing, too. Cryptocurrency has been demanded as ransoms for kidnapping cases from Costa Rica to Norway in recent years. These instances have thankfully been rare (and the Norway case turned out to be a murder cover-up). But these few cases are the start of a trend that is expected to increase. For example, cryptocurrency is seeing a rapid rise in popularity in Nigeria — a country where kidnapping has become a profitable business, according to a 2020 report by consulting firm SB Morgen. Unfortunately, it’s not hard to imagine the possibilities.
If you need further proof of crypto’s appeal to criminals, know that there are plenty of bad actors aiming to steal cryptocurrency — or even the machines used to mine it. Cybercriminals ranging from lone-wolf opportunists to state-sponsored hackers like North Korea’s Lazarus Group are well-immersed in the world of crypto. Some criminals simply prefer to “borrow” cryptocurrency versus stealing it outright — like the hacker who penetrated Ethereum Classic’s blockchain, rewriting the transaction history and “double spending” $1.6 million.
“Pseudonymous” Doesn’t Mean Anonymous
So, why is cryptocurrency so popular with criminals? Transactions can happen fast, and they’re hard (though not impossible) to trace. Blockchain-based currency has become popular within the criminal community because its pseudonymous. As the Bitcoin Project explains about its cryptocurrency model, “transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances.”
For law enforcement agencies, the chances of encountering a criminal case that involves some type of cryptocurrency transaction are rising fast—not just in cybercrimes, but in drug trafficking, terrorism, and gang-related crimes.
Creating A Crypto Strategy
Setting up a proper crypto strategy begins by taking time to evaluate resources and goals. Questions that leaders of law enforcement agencies should ask include:
- How often is cryptocurrency turning up our investigations?
- What will be the anticipated impact of crypto on future investigations?
- How are we evaluating cryptocurrency in cases today?
- Do we have the right technology in place to investigate crypto crimes appropriately? If not, what types of tools and solutions do they need?
- How well-equipped are investigators to conduct cryptocurrency-related investigations? If they are not, what training do they need to learn best practices and techniques?
Cryptocurrency is still finding its way, but all signs suggest that digital currencies — Bitcoin, Dogecoin, Ethereum, Monero and many others — are here to stay. Almost certainly, cryptocurrency will remain a go-to method of payment for many criminals around the world. For law enforcement agencies, the pressure is only increasing to create a formal and robust crypto strategy, and to begin building up their capacity to tackle these hard-to-investigate crimes.
About the Author: Leeor Ben-Peretz leads Cellebrite’s strategy & corporate business development functions. He brings over 20 years of experience in the forensic, telecom, and software security markets, having served in key business development and product management related positions at industry-leading companies such as Aladdin Knowledge Systems (NASDAQ: ALDN), Pelephone Communications, Comverse (NASDAQ: CMVT), and InfoGin.
During his 11-year tenure with Cellebrite, Leeor has been instrumental in driving the evolution of the company’s offering from a single product to a rich portfolio of innovative products, solutions, and services. Leeor holds an Executive MBA degree from the Hebrew University of Jerusalem, and a BA degree in Business and Economics from the Academic College of Tel-Aviv.