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PARIS: Under the headline Parisian Scammers, an online detective known as ZachXBT published a blog in August detailing how two young men stole millions of dollars worth of crypto assets.
To his surprise, French police announced last week that they had acted on his information and charged five people.
ZachXBT said it was the first time his investigation had led to police action AFPMoredespite investigating $250 million worth of crypto fraud and theft and documenting them for his 300,000 Twitter followers.
One reason for the lack of action is that low-level fraud is not a priority.
Authorities in the European Union and US, leaders in cryptocurrency control, have relentlessly focused on aspects of cryptocrime related to terrorist financing, money laundering and sanctions violations.
Arrests at the federal level are rare in the United States. Only eight suspects were indicted in the first six months of this year by a dedicated Department of Justice unit.
U.S. federal agencies have accused amateur rapper Heather Morgan, nicknamed Razzlekhan, who was indicted for money laundering in February and, more recently, reality TV show star Fined this month for illegally promoting cryptocurrencies. We’ve been concentrating on high-profile suspects, including the star, Kim Kardashian. .
However, specialist cryptocurrency firm Chainalysis says more than $3.5 billion was lost to fraud and hacks between January and July.
AFP has contacted police and criminal authorities in Europe and the United States, but was unable to provide figures on the rate of arrests for crypto-related offenses or the amount of charges.
The scale of criminal activity proves enormous for law enforcement agencies already short on financial crime resources.
Chainalysis is one of several companies rushing to fill the expertise gap by selling tools and services to agencies such as the New York Police Department.
Former New York Police Chief Terry Monaghan said at a recent Chainalysis event that officers faced three cryptocurrency cases every day before he resigned last year.
However, they had no way to investigate, so the case was closed.
“Victims had nowhere else to go,” he said, noting that federal agencies are only interested in cases worth millions of dollars.
Another part of the problem is the orientation from above.
The focus is on terrorism and the lifting of sanctions as regulators struggle to decide whether crypto assets are securities or commodities.
If they plump into securities, crypto companies could face so many regulations and fines that the sector could be devastated.
Omid Malekhan, a professor at Columbia University, said operations by U.S. agencies could be seen as their fear of what a crypto-centric future could mean for U.S. power at home and abroad. Stated.
If decentralized cryptocurrency networks revolutionize finance, US politicians will not be able to exert power the way they currently do against the dollar and banks.
Victims of low-level fraud are often left indifferent as Washington and Brussels focus on high-value targets.
Some asked ZachXBT for help, but he recovered the funds for them.
I would say that law enforcement is almost non-existent in the crypto space.
But he said at least U.S. officials are paying more attention to lower-level fraud.
Since cryptocurrency lender Celsius went bankrupt after owing investors $4.7 billion, the scam has become hard to ignore.
Many of the losers were ordinary people looking for quick and easy profits.
Their testimony to regulators pensioners stripped of their savings, small-scale investors suicidal and farm owners who lost their livelihoods resets the image of the classic cryptocurrency scam victim. Did.
Both Monahan and Malekhan think law enforcement is slowly grasping.
Monahan applauded the tracking technology provided by Chainalysis and others, which allowed for the return of some funds.
“At least we got something back[to the victims]. We didn’t just take the case and throw it in the trash,” he said.
And despite much touted blockchain anonymity, Malekhan says increasingly sophisticated tools are helping uncover the identities of fraudsters.
Once participants are unmasked, their on-chain history becomes a goldmine of data for tracking across the network, said Malekhan.
But the damage of years of loose enforcement will be hard to undo.
“I think the lack of policing encourages and encourages scammers,” says Molly White of the “Web3 is on track” project that has documented some of the most outrageous scams and thefts in the crypto world. said Mr.
I think it contributes to the perception that cryptocurrency hacking is essentially risk-free and rewarding.
