Police

Chainalysis and Calgary police launch cryptocurrency investigation center

Calgary’s police department has launched the Western Canada Cryptocurrency Investigations Centre in partnership with blockchain data firm Chainalysis.

A joint task force featuring investigators from the Calgary police department and analysis from blockchain data firm Chainalysis, dubbed the Western Canada Cryptocurrency Investigations Centre, was officially launched on April 12. 

In a blog post announcing the partnership, Chainalysis co-founder and chief strategy officer Jonathan Levin remarked that “this demonstration of public-private partnership to solve novel issues in financial services is a model that the rest of the world can learn from.”

The new center will expand on current efforts to address expanding cryptocurrency-related crime in Western Canada.

According to Chainalysis, Canada has seen a massive uptick in cryptocurrency adoption rates. Per the company’s blog post, “when we look at Canadian engagement with crypto ATMs, decentralized exchanges, and centralized exchanges, we see that Canada has experienced a nearly 213% increase since 2019 as of Jan 2023, with a peak level of adoption around 865% greater than March 2019 in May of 2021, driven largely by interest in DeFi.”

Related: Canada crypto regulation: Bitcoin ETFs, strict licensing and a digital dollar

This rapid growth, however, has been accompanied by an increase in crime. Chainalysis reports that more than $41 million in funds were lost to cryptocurrency scams in Canada in 2022 alone. It also notes that “for every 1,000 Canadians, there was at least $1,144 CAD in total exposure to illicit crypto activity” in the same period.

The Calgary police department plans to implement the private-sector expertise from Chainalysis to augment its investigator training programs and, per the blog post, to provide officers with “around-the-clock case support.”

The next steps, according to Chainalysis, involve expanding the program to serve more law enforcement agencies in Western Canada. The company intends to eventually “scale this concept globally, working with law enforcement personnel around the world to offer bespoke, customized offerings depending on the unique needs of the region at hand.”

Hong Kong’s losses to crypto scams doubled to $217M last year: Report

Crypto-related scams in Hong Kong reportedly accounted for over 50% of the total $407 million stolen from city residents in tech crimes in 2022.

Some countries worldwide suffered bigger financial losses to cryptocurrency scams despite a massive bear market in 2022.

Losses from crypto scams in Hong Kong amounted to 1.7 billion Hong Kong dollars ($216.6 million) last year — surging 106% from a year before — according to local police.

The number of crypto-related scams reported in Hong Kong in 2022 equaled 2,336 cases, surging 67% from 1,397 cases recorded by police in 2021, the South China Morning Post (SCMP) reported.

Hong Kong scams involving crypto accounted for more than 50% of the 3.2 billion HK$ ($407 million) stolen from city residents in technology crimes, according to the official data from the Hong Kong police CyberDefender website. In the previous four years, online scammers bagged a similar amount of money or about 3 billion HK$ annually.

The were almost 23,000 reported cases of technology-related crimes in 2022.

Technology crime figures in Hong Kong. Source: Hong Kong police CyberDefender website

According to SCMP sources, police witnessed an increase in the use of cryptocurrency as a medium for online scams, with fraudsters being able to hide their identities, transaction flow and final destination. One insider reportedly said that crypto use in online crimes has made tracking criminal funds more complicated for enforcement.

The Hong Kong police force’s cybersecurity and technology crime bureau also shared some observations about a typical crypto-related scammer, describing such perpetrators as pretending to be highly experienced in investing in crypto assets, precious metals or foreign exchange products. Such persons often lure victims into installing fraudulent investment applications showing fake transactions and returns, police stated.

Related: Binance launches anti-scam campaign after Hong Kong pilot run

The report comes amid the government of Hong Kong becoming increasingly engaged with the development of cryptocurrency infrastructure, distinguishing its crypto regulation approach from China’s blanket crypto ban enforced in 2021. In February, Hong Kong’s Securities and Futures Commission called for public feedback on the newly proposed licensing regime for crypto exchanges set to take effect from June 2023.

Terraform Labs co-founder Do Kwon gets probed by Singaporean authorities

Local police in Singapore sent an email on Monday saying they have begun a probe connected to Do Kwon’s Terraform Labs.

Local authorities in Singapore announced they had begun a probe connected to Do Kwon’s Terraform Labs.

According to a Bloomberg report, Singaporean police sent an email on March 6, which said, “investigations have commenced in relation to Terraform Labs.” The email also added that the inquiries are “ongoing,” and Do Kwon is not currently in the city-state.

Last month, on Feb. 16, the United States Securities and Exchange Commission (SEC) accused Kwon and Terraform Labs of fraud in a new lawsuit.

Some voices in the crypto space have criticized the lawsuit as a way for the SEC to go after stablecoins with future lawsuits. Lawyers in the industry have even called the SEC’s comparisons of assets “wild.”

Meanwhile, the SEC probe uncovered that Kwon removed around 10,000 Bitcoin (BTC) from the Terra platform and the Luna Foundation Guard, which he eventually converted to fiat. In total, the SEC alleges Kwon has laundered over $100 million worth of Bitcoin since the initial collapse of the platform.

At the time of writing, Kwon has made no comment. The Terraform Labs co-founder has been active on social media throughout the scandal. However, he has not tweeted since the beginning of February.

Related: Gary Gensler’s SEC is playing a game, but not the one you think

This entire saga has its roots back in May 2022 when the Terra USD (UST) stablecoin lost its peg to the U.S. dollar. The subsequent collapse of the Terra ecosystem caused a major implosion in the digital asset market, with losses of nearly $40 billion.

Terraform Labs has also been investigated by authorities in South Korea, where a warrant was issued for Kwon’s arrest. South Korean police traveled to Serbia in their efforts to locate Kwon. 

On Feb. 15, South Korean prosecutors requested a warrant to arrest a local e-commerce executive who they accused of accepting Terra (LUNA) for promoting Terra Labs.

French police arrest 2 people in connection to Platypus attack

The French police have arrested two suspects and seized 210,000 euros worth of crypto in connection with the Platypus exploit.

French police have arrested two suspects in connection with the $9.1 million Platypus exploit, and 210,000 euros ($222,000) worth of cryptocurrency has been seized, according to the local authorities. 

Investigations leading to the arrests were supported by on-chain sleuth ZachXBT and crypto exchange Binance, Platypus said. The same exploiter compromised the decentralized protocol in three flash loan attacks on Feb. 16.

The attacks resulted in the theft of several stablecoins and other digital assets. The first attack resulted in the theft of approximately $8.5 million in assets. In the second incident, approximately $380,000 in assets were mistakenly sent to the Aave v3 contract. In the third attack, roughly $287,000 was stolen. The attack resulted in the Platypus USD (USP) stablecoin depegging from the United States dollar. 

Perpetrators used a flash loan method to explore a logic error in the USP solvency check mechanism within the collateral-holding, Platypus recently confirmed. The stable swap operations have not been affected.

A flash attack is the same method used by Mango Markets exploiter Avi Eisenberg, who claimed responsibility for manipulating the Mango (MNGO) price in October 2022. After the exploit, Eisenberg said that “all of our actions were legal open market actions, using the protocol as designed.” Eisenberg was arrested in Puerto Rico on fraud charges on Dec. 28.

Platypus announced a plan to return funds to affected users on Feb. 23. According to the protocol, 63% of the main pool funds will be returned within six months. As per the plan, reminting frozen stablecoins could recover 78% of the funds. “If our proposal submitted to Aave is approved and Tether confirms reminting the frozen USDT, we will be able to recover approximately 78% of user’s funds,” noted the protocol.

Interpol wants to police metaverse crimes, reveals secretary general

According to Stock, criminals have started targeting users on platforms similar to the metaverse, adding that “we need to sufficiently respond to that.”

The International Criminal Police Organization (ICPO), or Interpol, is investigating how it could police crimes in the metaverse. However, a top Interpol executive believes there are issues with defining a metaverse crime.

According to BBC, Interpol Secretary General Jurgen Stock revealed the agency’s intent to oversee criminal activities on the metaverse. Stock highlighted the ability of “sophisticated and professional” criminals to adapt to new technological tools for committing crimes.

The move to police the metaverse comes nearly four months after Interpol launched its own metaverse in October 2022 at the 90th Interpol General Assembly in New Delhi, India.

The official Interpol office in the metaverse. Source: Interpol

During the launch, the announcement read:

“As the number of metaverse users grows and the technology further develops, the list of possible crimes will only expand to potentially include crimes against children, data theft, money laundering, financial fraud, counterfeiting, ransomware, phishing, and sexual assault and harassment.”

According to Stock, criminals have started targeting users on platforms similar to the metaverse, adding that “we need to sufficiently respond to that.” However, the organization faces issues with defining a metaverse crime. Madan Oberoi, Interpol’s executive director of technology and innovation, stated:

“There are crimes where I don’t know whether it can still be called a crime or not. If you look at the definitions of these crimes in physical space, and you try to apply it in the metaverse, there is a difficulty.”

Moreover, he revealed that Interpol is also challenged with raising awareness about possible metaverse crimes.

Related: The world must take a ‘collective action’ approach to regulations — India’s finance minister

In parallel to launching into the metaverse in October 2022, the organization created a dedicated unit to fight crypto crimes.

The initiatives followed Interpol’s “red notice” to global law enforcement in September for the arrest of Terraform Labs co-founder Do Kwon.

Nexo offices reportedly raided by police in Bulgaria

The investigators have alleged that Nexo is involved in money laundering and violating global financial sanctions against Russia.

Troubled cryptocurrency lender Nexo is facing more pressure from regulators as its offices have been reportedly raided as part of an international investigation.

A group of prosecutors, investigators and foreign agents started searches of Nexo’s offices in the Bulgarian capital, the local news agency Standart reported on Jan. 12.

The operation was reportedly initiated a few months ago, targeting a large-scale financial criminal scheme allegedly involving money laundering and violations of international sanctions against Russia. Citing sources of the Bulgarian National Television, the report alleges Nexo’s involvement in the scheme.

The television also highlighted Nexo’s alleged ties with the government of Bulgaria, specifying that Nexo was co-founded by former parliament member Antoni Trenchev and Georgi Shulev, the son of former deputy prime minister Lydia Shuleva.

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Nexo was quick to react to the latest news, taking to Twitter to assure the public that the company has been compliant with global crypto regulations and has enforced strict Anti-Money Laundering and Know Your Customer policies.

Related: Sanctions couldn’t ‘pull the plug’ on Tornado Cash: Chainalysis

“Unfortunately, with the recent regulatory crackdown on crypto, some regulators have recently adopted the kick first, ask questions later approach. In corrupt countries, it is bordering with racketeering, but that too shall pass,” Nexo wrote.

Founded in 2018, Nexo operates a cryptocurrency investment platform, also allowing users to stake and borrow against crypto. The firm first encountered issues in the United States last year, with the California Department of Financial Protection & Innovation filing a desist and refrain order against Nexo regarding its interest service in September. Nexo eventually decided to gradually cease operations in the U.S. after failing to find a dialogue with local regulators.

Breaking: FTX founder Sam Bankman-Fried arrested, set to be extradited to US

Royal Bahamas police have arrested SBF at the request of the U.S. government, based on a sealed indictment.

Sam Bankman-Fried has been arrested by authorities in the Bahamas at the request of the U.S. government, just a day before the disgraced former FTX CEO was due to testify before Congress.

Bankman-Fried was arrested by the Royal Bahamas Police Force following a formal notification from the United States government that it has filed criminal charges against him, according to a Dec. 12 statement from the Bahamas Attorney General (AG) and Minister of Legal Affairs, Ryan Pinder.

Citing a person with knowledge of the matter, The New York Times reported on Dec. 12 that the charges against Bankman-Fried include wire and securities fraud, conspiracy to commit wire and securities fraud and money laundering, 

The U.S. will likely request the extradition of Bankman-Fried, with Pinder stating that the Bahamas will “promptly” process any extradition request.

Bahamian Prime Minister Philip Davis said in a statement that both countries have “a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law.

A Dec. 12 tweet from the U.S. Attorney’s Office for the Southern District of New York said authorities in the Bahamas arrested Bankman-Fried based on a sealed indictment it filed that it plans to unseal “in the morning.”

Bloomberg reported on Dec. 10 that prosecutors from New York, FBI agents and regulators met with FTX’s lawyers to discuss the documentation that investigators want to obtain.

Related: SBF tried to destabilize crypto market to save FTX: Report

The U.S. Department of Justice (DOJ) was “closely” examining whether FTX improperly transferred hundreds of millions around the same time as the company declared bankruptcy on Nov. 11.

Bahamian authorities were similarly undertaking their own “active and ongoing” investigation into FTX as announced on Nov. 27 by Pinder that involved the country’s Securities Commission, the Financial Intelligence Unit and the police’s financial crimes unit.

Bankman-Fried’s arrest comes a day before he was expected to appear remotely to testify before the House Committee on Financial Services in a hearing investigating the collapse of the exchange.

The letter announcing the arrest from the Bahamas Attorney General.

Coinbase report shows dramatic increase in law enforcement enquiries worldwide

The crypto exchange says the overall number of enquiries is up 66%, with the United States producing the most by far; the U.S., and three European countries made 80% of all requests.

Coinbase has seen information requests from law enforcement surge over the past year, the cryptocurrency exchange reported in its latest transparency report. The vast majority of the enquiries came from the United States and were tied to criminal investigations. 

Coinbase’s new transparency report covers the last four quarters ending with September. In that time, the exchange received 12,320 information requests from law enforcement, an increase of about 66%. The United States accounted for 5,304, or 43%, of those requests. The United Kingdom, Germany and Spain produced between 1,000 and 2,000 requests apiece. Those four countries accounted for 80% of requests, while 57 other countries also made requests.

The 1,304 requests from Spain represent an increase o 940%. It was one of six countries that had more than doubled their enquiries in the last year. Twenty-one countries sent requests for the first time during the reporting period, including the Czech Republic, which sent 104 of them.

Related: Binance CEO, Coinbase exec feature in Masterclass crypto crash-course

According to the report, which was attributed to chief legal officer Paul Grewal, Coinbase may challenge or ask agencies to narrow their requests, as decided by their team of lawyers. The exchange does not provide law enforcement with direct access to information, but:

“Coinbase may produce certain customer information, such as name, recent login/logout IP address, and payment information; this type of information may be subject to requests by government and law enforcement agencies when a customer uses one of our applications or our website, as described in our privacy policy.”

“We also aim to provide anonymized or aggregated data that aids law enforcement and government agencies with their work, where it is possible to do so,” the report added.

Coinbase CEO Brian Armstrong said in an interview earlier in December that the exchange’s trading revenue fell by about half over the past year. Coinbase has 108 million customers worldwide.

Singapore police warn investors against FTX phishing scams: Report

FTX has an estimated $8 billion hole in its balance sheet. Investors desperate to get their money back are being targeted by phishing scams.

The Singapore Police Force has warned investors to be weary of fake websites claiming they can help them recover funds from the now-bankrupt cryptocurrency exchange FTX. 

On Nov. 19, the police issued a warning about a website claiming to be hosted by the United States Department of Justice that prompts FTX users to log in with their account credentials, local news agency Channel News Asia reported. The website, which was not identified, targets local investors affected by the FTX collapse, claiming that customers “would be able to withdraw their funds after paying legal fees.”

The police said the website was a phishing scam designed to fool unsuspecting users into giving away their private information.

Local authorities have also warned against fake online articles that promote cryptocurrency auto trading programs in the country, which appear to have proliferated recently. These articles often feature prominent Singaporean politicians, such as parliament speaker Tan Chuan-jin.

Related: HK and Singapore’s mega-rich are eyeing crypto investments: KPMG

Although this isn’t the first time Singapore’s police have issued public warnings against crypto scams, recent developments in the industry have made investors more vulnerable to attacks. An estimated 1 million investors and creditors have been affected by FTX’s bankruptcy. Collectively, they face billions in losses.

Despite promoting itself as a hub for cryptocurrency and Web3 innovation, Singapore has pursued stricter regulations around retail trading and self-hosted wallets. The city-state has repeatedly warned investors that digital assets are highly speculative and has even banned crypto advertising on social media.

Nevertheless, several crypto firms have applied for licensing in the city-state, with stablecoin issuers Circle Internet Financial and Paxos recently gaining approvals from the Monetary Authority of Singapore.

MakerDAO co-founder Nikolai Mushegian dies at 29 in Puerto Rico

Mushegian was an important figure in the crypto community, contributing to multiple projects, including MakerDAO, BitShares and Balancer.

Nikolai Mushegian, co-founder of the cryptocurrency lending platform MakerDAO and the decentralized Dai (DAI) stablecoin, was found dead in Puerto Rico last week.

Mushegian died due to drowning after being dragged by sea currents on the Condado beach in San Juan, the local newspaper El Nuevo Día reported. Mushegian had no vital signs by the time his body was rescued.

The Condado beach is considered one of the world’s most dangerous places for swimmers, reportedly taking the lives of at least eight people in 2021.

The unfortunate event was reported to local authorities on the morning on Oct. 28. According to a police report, Mushegian was a resident of San Juan. The scene was reportedly investigated by the San Juan Homicide Division and a local prosecutor.

Mushegian was an important figure in the cryptocurrency community, contributing to multiple industry projects, with some referring to him as a “Dai architect.” The 29-year-old crypto developer is known for his work with MakerDAO forks Rico and Rai, as well as the proof-of-stake blockchain network BitShares. Mushegian is also a co-founder of the automated market maker Balancer.

MakerDAO founder and CEO Rune Christensen took to Twitter on Oct. 31 to say that Mushegian contributed important inputs to Maker’s development and has done some crucial work since the early days of Ethereum.

Cardano founder Charles Hoskinson wrote on Twitter that he knew Mushegian from back in the BitShares days. “He was a very young and extremely bright man who had a very wide array of interests from game theory to Urbit,” Hoskinson said, adding that the coder had a deep understanding of technology.

Tether co-creator Craig Sellars noted that Mushegian’s death came just a few days after the MakerDAO community voted to approve custody of $1.6 billion in USD Coin (USDC) with the Coinbase crypto exchange.

Related: MakerDAO revenue tumbles 86% on Ether and Wrapped BTC woes

Mushegian was an active community member on social media. His Twitter account, Delete_shitcoin, has about 5,500 followers at the time of writing. His last tweet was published just a few hours before his death, referring to suggestions of alleged blackmail from the United States Central Intelligence Agency and Mossad. Mushegian previously made similar statements on Twitter, hinting at a potential “suicide” by the CIA as one of his possible futures.