The U.S. Secret Service is cracking down on illicit digital currency transactions, seizing more than $102 million in cryptocurrency from criminals in connection with fraud-related investigations.
David Smith, assistant director of investigations, said agents and analysts actively track the flow of Bitcoin and other cryptocurrencies on the blockchain, similar to an old-fashioned surveillance. Best known for protecting presidents, the Secret Service also conducts financial and cybercrime investigations.
“When you follow a digital currency wallet, it’s not different than an email address that has some correlating identifiers,” Smith said in an interview at the agency’s headquarters. “And once a person and another person make a transaction, and that gets into the blockchain, we have the ability to follow that email address or wallet address, if you will, and trace it through the blockchain.”
The seizure of more than $102 million in crypto has occurred in 254 cases since 2015, according to statistics compiled by the agency.
Those cases include an investigation with the Romanian National Police in which 900 victims across the U.S. were targeted. That scheme involved posting false ads on popular online auctions and sales websites for luxury items that did not exist, and the delivering of invoices supposedly from reputable companies, making it appear the transactions were real. The perpetrators then engaged in a money-laundering scheme in which victims’ funds were converted into digital assets, the Secret Service said.
Other cases targeted a Russian cybercrime syndicate that used a crypto exchange to launder funds as well as a ransomware operation tied to Russian and North Korean criminals in which Bitcoin payments by U.S. companies to stop the attacks were sent to the suspects’ crypto wallets.
“One of the things about cryptocurrency is it moves money at a faster pace than the traditional format,” Smith said, adding that the quick pace of transactions makes it attractive to both American consumers and criminals. “What criminals want to do is sort of muddy the waters and make efforts to obfuscate their activities. What we want to do is to track that as quickly as we can, aggressively as we can, in a linear fashion.”
Smith was interviewed inside the agency’s Global Investigative Operations Center, known as the “GIOC,” in which agents and analysts track cryptocurrency transactions worldwide in a secure room at the agency’s headquarters. He compared the illicit digital money trail to looking at a “house of mirrors.”
Once the Secret Service pins down the illegal activity, it works to “dig a little deeper into those transactions and deconstruct [them],” Smith said. “You send me something bad on an email, I know there’s some criminal activity associated with that email address, I can deconstruct, find whatever tidbits of information that you used when you initially logged in or signed up for that email address.”
Investigators are finding thieves will transfer stolen Bitcoin and other digital currencies into stablecoins. So, in order to track this activity, they are watching the market. “Because, you know, the criminals, they’re humans too. They want to avoid some of that market volatility associated with some of the major coins,” he said.