“My first loss was with CoinsMarkets. It happened when the exchange closed with our funds. I didn’t even try to contact anyone or alert any police.”
These are the sentiments of an intrepid cryptocurrency investor; one among who replied to a tweet asking about the lack of recourse persons face when their digital assets are stolen in a hack, Ponzi scheme or exit scam.
Up to $10 billion in crypto has been stolen to date, according to Pawel Kuskowski, CEO of blockchain sleuthing company Coinfirm. Kuskowski wants to offer victims a chance at getting their funds back.
Coinfirm revealed to Coindesk that they have teamed up with global investigations company Kroll, an arm of consulting company Duff & Phelps. The joint initiative being unveiled is known as ReclaimCrypto. It combines cutting-edge blockchain forensic techniques with the established scope of legal investigation and asset recovery.
“So far, there is no one place where victims can go and get help. It’s almost like they are pleading to get someone interested in their case. In the end, they have to work it out themselves; see about getting a lawyer, perhaps in some other jurisdiction.”
Figures on what can be recovered vary. For example, CipherTrace, another analytics company recently announced some $4 billion in crypto has been lost in 2019. Kuskowski’s estimate constitutes historic (and as yet unresolved) events such as Mt Gox, which in today’s money would be equivalent to around $1 billion.
Obviously, Kuskowski and his team aren’t doing this only for the good of the people; there are success charges levied on a case-by-case basis, he said, adding:
“Doing the market analysis for this product, we started by calculating the kind of top cases, where we know we could be successful and recover funds, which was about 200 cases.”
Those incidents alone account for about $1.5 billion, according to Kuskowski.
How it works
Coinfirm’s main thing is anti-money laundering (AML) within cryptocurrency networks, done by analyzing the history of transaction using various smarts and big-data analytics. Likewise to Elliptic and Chainalysis, it works with over 50 exchanges and has established a large database in this niche.
Kroll on its part takes a more “traditional” strategy, which could involve producing court orders to ask an internet service provider to disclose details about IP addresses, or using previous CIA and FBI operatives to scour the dark web for activity involving stolen digital assets.
One thing to note is that Kroll isn’t new to cryptocurrency. The company worked with the U.S Securities and Exchange Commission (SEC) in 2018 in relation to fraudulent coin offerings. Kroll also revealed it helped trace the perpetrators in Europe of $27.8 million bitcoin theft.
If victims so decide, Kroll can potentially present third-party litigation funding. This means companies that offer specialized finance to the legal marketplace, including Therium and Burford Capital, will take the cost of people’s litigation. For this, the firms take around 30% of the recovered money and return the rest to the loss victims.
Kroll’s managing director, Benedict Hamilton, said:
“From a victim’s point of view, where the police have failed to recover that money, they are not having to spend anything to get something.
And no one recovers funds on their behalf without their permission. It makes the whole economics of recovering stolen funds very different – which is very exciting.”
Hamilton referred Coinfirm as “a torch shining on the blockchain,” adding that this can be extended by Kroll into the grey zones of the dark web.
Kroll Cyber operates a specialist darkweb division of Pittsburgh, Pennsylvania, which is supervised by Keith Wojcieszek, former head of the criminal investigations division of the U.S Secret Service’s cyber unit.
This operation crunches petabytes of dark web info from P2P sites, according to Hamilton, who added:
“With the ReclaimCrypto initiative in mind we have have been able to repurpose it so we can go into that database with a wallet string and look for any identifiers that are associated with that wallet name – perhaps a conversation over the selling of stolen credit cards or someone offering criminal services and providing that wallet as an address.”
Find out the person or follow the money
Hamilton went on to say that there are two ways to follow when making a crypto investigation: find out who did it or follow the money.
ReclaimCrypto’s primary objective is asset recovery, as that’s what the customer is paying for. But eventually both routes lead to the same destination. He said:
“It is inconceivable that the investigative process would finish without us giving all the details to relevant law enforcement for them then to get the benefit of the work and lock the thieves up.”
ReclaimCrypto will especially be eyeing bitcoin and ether recoveries, but will also look into XRP, LTC, BCH, DASH and NEO. Crypto loss victims can find out more here.
But for those who have coins stolen, some remain rational about it. “That’s life,” said Hamilton, adding:
“It made me grow a lot and it’s part of my adventure in crypto.”