- Tracking crypto criminals
- Cryptocurrencies versus traditional finance
- How to protect your crypto assets
Binance, the world’s leading crypto exchange has hired two former agents of the Internal Revenue Service (IRS) of the United States. Tigran Gambaryan and Matthew Price have successfully chased criminals dealing with crypto worth of billions of US dollars, both on-chain and off-chain. Earlier, Binance had hired a dark web specialist from the European Union Agency for Law Enforcement Cooperation (Europol) and a compliance director from the eToro trading company. They have been assigned with tracking crypto-related incidents and investigating crimes within the exchange itself.
“When I saw crypto and the fact that you have this permanent blockchain record of all the transactions, that kind of really piqued my interest. A lot of the work I did in the intelligence community was using large sources of data and combing through those to find leads or sources—and I saw blockchain as the same opportunity,” said Matthew Price, senior director of investigations for North and South America at Binance.
Tracking crypto criminals
Matthew Price used to work at the IRS and was also a targeting officer at the CIA. He was engaged in selecting people, contacts, and organizations with access to information necessary to eliminate threats to the United States and its interest. At the leading crypto exchange, he has been joined by Tigran Gambaryan, an experienced IRS special agent, who became VP of global intelligence and investigations.
For people who do not know much about crypto, it may seem like the perfect instrument for financial crime. This is the way crypto is often depicted in the media. The two new Binance experts do not agree with that.
Price investigated Helix, a Bitcoin mixer that got involved in illicit darknet transactions. The company processed over 310 million US dollars in crypto and then went bankrupt.
“We reached out to Reddit, we reached out to some forums trying to figure out who was behind the account, and it really led nowhere. Then we really focused on the actual transactions, and the service was charging a fee,” Price commented.
The investigators came upon a series of transactions that were made to look as if the administrator charged a small fee for every transaction.
“So by following that thread, we were able to get links to an identity,” Price explained. The crimes were committed by Larry Harmon from Akron, Ohio — one of the early users of Google Glass. Ironically, his identity was discovered due to a shared Google Glass photo of a computer screen with the Helix administrator page. Larry Harmon pleaded guilty, with over 4,400 Bitcoin seized from him.
Tigran Gambaryan has also experienced many similar stories. He started working with crypto in 2011 when he was an IRS agent working in Oakland and San Francisco. He conducted some of the most famous crypto-related investigations, such as the Mt. Gox hack in 2014. He also investigated the BTC-e exchange. Its founder was accused of laundering over 300,000 Bitcoin over the period between 2011 and 2017.
Gambaryan was the one to conduct the investigation of the Silk Road corruption where crypto was traced back to the identity of criminals for the first time. The crimes were committed by two federal agents who were assigned to work on the Silk Road case. It was a darknet marketplace where Bitcoin was used for conducting illicit transactions. Gambaryan prepared a criminal complaint and described the actions of the two federal agents, which resulted in their conviction.
Cryptocurrencies versus traditional finance
Having devoted a lot of time to investigating crypto-related crimes, Tigran Gambaryan still believes in crypto. “Cryptocurrency is just like any other financial tool that can be used for legal or illegal purposes,” he commented.
An important difference between cryptocurrencies and traditional finance is that investigators face significant difficulties.
“Money launderers understood that when you set up offshore entities, and you set up offshore bank accounts, that slows down law enforcement. As an investigator, you’re now required to go through processes for months to get bank records for different financial institutions around the world. And by the time you actually get to the target, the target is gone,” Gambaryan commented.
Price also said that “a lot of the investigation techniques are the same,” because they deal mainly with data analysis. He explained, however, that it is also about knowing how to operationalize such data and obtaining the help of crypto exchanges when investigating.
At Binance, the former IRS agents will continue to deal with similar issues, investigating crypto crimes.
How to protect your crypto assets
Centralized exchanges are becoming less and less customer-friendly. For example, between November 2021 and September 2022, the Binance investigation group responded to over 27,000 law enforcement inquiries with an average response time of three days.
One cannot set up an account without going through KYC (Know Your Customer) procedures. Even after providing comprehensive personal information (Binance even requires a passport scan), there is no guarantee that the money will be safe and sound.
Storing crypto in exchange wallets entails significant risk. Just one unfortunate transaction with coins marked as dirty by AML algorithms will promptly lead to getting blocked. It will take a lot of effort to prove that you are not guilty, and that the coins ended up with you by accident.
There are two ways to protect your assets from these exchanges striving to satisfy regulators. The first one is to scrutinize the wallets of counterparties and monitor transactions. However, this is a tremendously inconvenient, time-consuming, and cumbersome process.
The second one is to use a bitcoin mixer. Choose a platform, where users can exchange old coins for new ones. After all, the cryptocurrency that went through the exchange is always considered clean. Moreover, it is important to use a mixer that is resistant to tracking algorithms and is able to make transactions more confusable and break ties in the blockchain.
