Tracking crypto fraud payments

Fraud transactions are often based on cryptocurrency or "crypto." While crypto payments are fast and may seem to provide anonymity, they are based on a technology called blockchain which provides a permanent ledger of all transactions.

Often, those conducting frauds and scams will use a technique called "peeling" to redistribute funds to multiple accounts in an effort to confuse investigators. However, advances in forensic software used by investigators make tracking these payments possible. Investigators will also use a technique called cluster analysis to determine if digital wallets behave in similar fashion across multiple transactions, which can be an indicator that the wallets are controlled by a single individual or entity. Fraud investigators will also use cross-chain tracking to follow transactions across multiple blockchains. 

Some cryptocurrencies, like Monero, intentionally hide transaction details. While the Monero ledger is public, individual transactions are intentionally scrambled to make it difficult to trace. There are also services referred to as crypto mixers that combine crypto funds from multiple sources and then redistribute the funds to make tracking difficult. And, crypto wallets do not require a real name, leading fraudsters to use false names or numbers.

While there are challenges in tracking crypto transactions from fraud payments, specialized law firms are focusing on these crypto forensics to assist with freezing and recoverying lost funds. Progress is being made. See the earlier post Changing Gears which discusses the progress the FBI's Recovery Asset Team and the Financial Fraud Kill Chain are making to help American's recover funds.

Again, rapid reporting is absolutely essential when you have been the victim of a scam. In our Recognizing and Responding to Elder Fraud training module, from the Menu click on Learning and Resources, then click How to Report Elder Fraud to see a brief video on how to report.