While cash and other traditional forms of payment leave a paper trail, cryptocurrency requires a different investigative approach. The fact that it can be stored on a small flash drive makes it an attractive target for fraudsters. Since converting cryptocurrencies into cash is easy and inexpensive, this method may soon be preferred by fraudsters. Here are some tips on how to conduct a successful crypto investigation. This is a guide for fraud investigators.
The first step in any cryptocurrency investigation is to determine whether there are any digital wallets linked to the suspect. In this case, investigators can look for a trail of transactions from a single address to a cluster of related addresses. Once they have identified a cluster, they can analyze its history and see if any of the addresses has a substantial UTXO or current value. If there is a large amount of activity at a single address, it may be worth continuing the investigation.
Among other tools that can be used to track cryptocurrency transactions is asset tracing. This process involves examining the full life cycle of a cryptocurrency account. This can involve using software tools or more traditional forensic methods. For example, investigators can review the origins of a digital wallet and analyze the transactions on it. They may analyze the size and frequency of transactions. This can help determine if the defendant is hiding assets in crypto, such as bitcoins.
The next step in a cryptocurrency investigation is asset tracing. Asset tracing is the process of analyzing the life cycle of a cryptocurrency account. An investigator may use forensic tools or software to review the origin of a digital wallet. They may also analyze the history of transactions to find a trail of the funds. These investigations can also provide a complete audit trail of cryptocurrency transactions. Forensic experts can trace a digital wallet’s history with a forensic tool.
In the case of a complex crypto fraud, a non-blockchain investigation is often needed. A non-blockchain investigation begins with a narrative of events and timeline. This step helps confirm material evidence of the fraud and documents the extent of financial losses. Other steps of the crypto investigation include digital forensic analysis of domain servers and email metadata, as well as the geolocation of the responsible parties. In addition to the forensic analysis, a forensic expert can perform due diligence.
While a forensic investigator’s work is largely limited by the time he or she has access to digital wallets, there are some exceptions. A forensic investigator can use a blockchain-based investigation to uncover a criminal’s identity. A cybercriminal has no way to identify the owner of a cryptocurrency. The criminal is simply unaware of the transaction. And a blockchain-based investigation can prove that the money in a cryptocurrency is not being laundered by the attacker.