How do on-chain detectives unravel the fog of war surrounding anonymous crypto crime funds?
The anonymity of cryptocurrency transactions hides the real identities and activities of users through technical means, offering greater privacy and financial freedom. However, this anonymity also presents challenges, especially when cryptocurrencies are used for illegal activities by criminals.
This article aims to explain how blockchain intelligence can be used to track and identify the entities behind addresses.
Why Cryptocurrencies are Used for Crime
The adoption of cryptocurrencies has been increasing annually, with the global market value exceeding $2.5 trillion. Simultaneously, criminals use cryptocurrencies for fraud, extortion, money laundering, and financing terrorism, aiming to profit from this emerging industry, which is not yet clearly regulated. In 2023, $24.2 billion of the total cryptocurrency transaction volume was related to illegal activities.
The reasons include:
- Separation from Real Identity: Cryptocurrencies offer a degree of anonymity, making it difficult to trace criminal groups. For those who cannot access traditional banking services, cryptocurrencies provide an alternative way to participate in financial activities.
- Transaction Convenience: Cryptocurrencies are global and can easily be used for cross-border transactions without geographic restrictions. Compared to traditional bank transfers, cryptocurrency transactions are fast, with low fees, enabling quick transfer and laundering of illicit funds.
- New Financial Tools: Blockchain technology (such as smart contracts and DeFi) offers new financial tools that criminals exploit for complex financial scams, such as phishing links, fake wallet schemes, and cryptocurrency investment frauds. Additionally, regulations and laws in emerging fields often lag behind technological advancements, allowing criminals to evade legal sanctions.
How to Trace Entities Behind Cryptocurrency Addresses
Cryptocurrency transactions naturally offer privacy protection, but this does not equate to complete anonymity.
For example, in a case involving a fake wallet app theft, when a victim’s crypto assets are stolen, entering the stolen hash into a blockchain explorer reveals the transaction details, showing approximately 202 BNB being transferred from one address to another. While the transaction details are public, the information provided is often limited, leaving victims unable to identify the entities associated with malicious addresses or the real purpose behind the transactions, and they cannot recover their funds through simple on-chain tracking.
However, using BitracePro’s onchain analysis, we can transform anonymous blockchain transactions into actionable information and conduct visual tracking.
Leveraging algorithms and models, Bitrace has labeled over 400 million onchain addresses, including major DEXs and CEXs, making onchain tracking in the Web3 world feasible. As illustrated, the hacker used PancakeSwap to convert part of the BNB into 46,000 USDT, then split the funds into four transactions for further laundering. One transaction directly went to the Transit Swap Exploit hacker address, while the other three went to three different Binance user addresses for cashing out. Once criminal funds enter centralized institutions, these institutions will impose restrictions on the relevant accounts based on compliance obligations.
By employing such tracking methods, Bitrace has investigated the operations and methods of dozens of the most active fake wallet crime groups, including their commission models, money laundering channels, software distribution techniques, and financial address structures. In 2023, Bitrace assisted in investigating 561 victim cases, helping some victims recover millions of dollars in losses. Clearly, on-chain address labeling, risk data, and blockchain intelligence are becoming increasingly important in combating crime.
In Conclusion
The anonymity of blockchain does not mean that criminal entities cannot be traced, nor should cryptocurrency become a breeding ground for crime. If you have unfortunately suffered a loss, please feel free to contact us. Bitrace will provide all possible assistance. Security companies can, through in-depth analysis of blockchain data, uncover patterns of illegal transactions, identify criminal entities, and help victims recover their losses.
Contact us:
Website: https://www.bitrace.io/
Email: bd@bitrace.io
Twitter: https://x.com/Bitrace_team