When a California man was scammed out of hundreds of thousands of dollars of cryptocurrency this year by a fake romance, Erin West was able to track and freeze the money.<\/p>\n
West, a deputy district attorney who heads the high technology crimes unit in Santa Clara County, said she believes the scammer lives in a country where there isn\u2019t an easy path to extradition, and thus is unlikely to be arrested anytime soon. The money, however, is a different story.<\/p>\n
\u201cOur bread and butter these days really is tracing cryptocurrency, and trying to seize it and trying to get there faster than the bad guys are moving it somewhere where we can\u2019t grab it,\u201d West said.<\/p>\n
West is one of a growing number of state and local prosecutors and law enforcement officials who have embraced a handful of digital tools that can monitor blockchains, the digital ledgers that track every transaction for most cryptocurrencies.<\/p>\n
West said her team tracked the victim\u2019s money as it bounced from one digital wallet to another until it ended up at a major cryptocurrency exchange, where it appeared that the scammer was planning to launder the money or cash out. West sent a warrant to the exchange and froze the money, and plans to return it to the victim.<\/p>\n
It\u2019s a stark reversal from just a handful of years ago when cryptocurrencies were seen as an unmitigated boon for criminals. Cryptocurrencies allow users to instantly send money over the internet without intermediaries like a bank. This can be done anonymously because the digital wallets that hold cryptocurrencies don\u2019t have to be tied to a person\u2019s identity.<\/p>\n
But because the digital ledgers that facilitate cryptocurrencies are public, law enforcement has in recent years begun to gain the expertise necessary to track cryptocurrencies, leading to bitcoin and ethereum playing a role in a significant number of criminal cases. During that time those cases have overwhelmingly been the purview of federal government agencies like the FBI, Secret Service, Department of Justice and the Internal Revenue Service.<\/p>\n
Those agencies have large budgets for tools like blockchain tracking programs and relationships with counterparts in friendly countries, which often lead to multinational cybercrime stings<\/a>. But there are limits to those operations, like when the hackers live in countries that don\u2019t extradite<\/a> to the United States, like Russia or China.\u00a0<\/p>\n The vast majority of legal requests like warrants and subpoenas to Coinbase, the largest American cryptocurrency exchange, come from federal law enforcement agencies, according to the company\u2019s two most<\/a> recent<\/a> transparency reports. Requests from all U.S. law enforcement more than doubled, from 1,197 to 2,727, from the second half of 2020 to the first half of 2021, with state and local requests showing the most growth in that period.<\/p>\n
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