Cryptocurrency Fraud Investigation
The rising popularity of cryptocurrency speculation comes with increased risks for investors. Complaints of investment fraud, theft, and price manipulation in virtual currency markets have risen sharply.
Hudson Intelligence conducts cryptocurrency fraud and cryptocurrency theft investigations for investors, businesses, public agencies, financial advisors and law firms.
Every cryptocurrency investigation is led by a Cryptocurrency Tracing Certified Examiner (CTCE) and Certified Fraud Examiner (CFE).
By combining state-of-the-art blockchain intelligence tools and digital forensics with traditional investigative techniques – and our experience fighting online crime and investment fraud – we deliver clear results in the most complex and challenging cases.
Investigations for Financial Recovery
Blockchains, cryptocurrencies and decentralized finance are genuine innovations with potential for positive impact on financial systems. But they are also buzzwords that have been badly abused to promote fraudulent schemes, including investment fraud and illegal market manipulation. The integrity of these new technologies has also been compromised by thefts, breaches, money laundering, ransomware and terrorist financing.
Cryptocurrency investigations are a frontline in the fight against financial crime. Investigations are pursued in coordination with financial recovery efforts by law enforcement and to support civil litigation on behalf of defrauded investors.
Ponzi Schemes
Promises of ‘guaranteed profits’ from an Initial Coin Offering (ICO), cloud mining operation or crypto token investment? Promoters of Ponzi schemes solicit investors with big talk about market innovation and insider insights, but instead of placing customer funds in a legitimate investment, they misappropriate the money to line their own pockets.
Crypto Romance Scams
A financially devastating form of romance scam introduces many first-time investors to the perils of crypto trading. Investors are solicited through a long, slow, scripted process of seduction, before being persuaded to send their money to fake trading platforms. Their online portfolios seem to grow and grow with huge profits — until they try to make a withdrawal.
Cryptocurrency Forensics and Asset Tracing
Online frauds, cybercrimes and cryptocurrency schemes may involve fictitious personas and stolen identities, controlled by individuals – or criminal organizations – in multiple countries. Perpetrators may attempt to obfuscate the flow of their funds across the blockchain through peel chains and layering, or launder illicit proceeds through darknet markets and high-risk exchanges.
However, Bitcoin and other crypto coins and tokens are not completely anonymous. Cryptocurrency transactions can be traced by investigators to identify perpetrators and determine the location of misappropriated funds.
Cryptocurrency forensics and asset tracing are critical parts of the cryptocurrency fraud investigation process. They are conducted in support of civil litigation, criminal complaints and regulatory enforcement actions.
Security Breaches and Theft
Hackers have emptied digital wallets – and company coffers – by exploiting security lapses in cryptocurrency exchanges, startups and initial coin offerings. Phishing attacks are frequently used to gain unauthorized access to administrative passwords and private keys. More than 10 percent of ICO proceeds – around $1.5 million per month – are reportedly lost as a result of attacks by hackers.
Market Manipulation
In a pump-and-dump scheme, unscrupulous promoters ‘pump’ an altcoin or crypto token with false statements about potential returns. They coordinate with conspirators, orchestrating a sell-off for a specified date. The value increases as unsuspecting victims buy more currency, but the price crashes as soon as insiders 'dump' their shares.
More About Crypto 'Pumps'...
Cryptocurrency Basics: Bitcoin and Beyond
Cryptocurrency is a virtual asset with no physical form, which exists purely as a digital record stored across a decentralized network of computers. Transactions are recorded in a distributed ledger known as the blockchain, where trades and transfers of assets are registered as blocks of new data and added to the end of the chain. The blockchain is automatically replicated across a peer-to-peer network – in what is called a ‘consensus protocol’ – to prevent participants from corrupting or changing the ledger in their favor.
Bitcoin (BTC) peaked in price in 2021, pushing the value of the cryptocurrency market into the trillions, along with increased trading of other cryptocurrencies and tokens such as Ether (ETH), Tether (USDT) and USD Coin (USDC). More recently, the market has endured multiple crash-and-recovery cycles, plus a series of billion-dollar bankruptcies, regulatory enforcement actions and high-profile criminal convictions.
The likelihood of financial recovery from cryptocurrency fraud or cryptocurrency theft can be influenced by multiple factors, including the extent of support from law enforcement and regulatory agencies; operations in foreign jurisdictions; and feasibility of tracing certain transactions, coins and tokens. Positive identification of perpetrators — and related analysis to de-anonymize cryptocurrency addresses, accounts and activity — may require subpoenas, warrants, or court orders. Financial restitution may also be contingent on the cooperation of commercial exchanges and virtual asset service providers in multiple countries, depending on the complexity of the crime and technical sophistication of the responsible parties.
Consult an Investigator
Hudson Intelligence assists law firms, businesses, public agencies and investors with cryptocurrency fraud investigations, asset tracing and due diligence.
Every cryptocurrency investigation is led by a Cryptocurrency Tracing Certified Examiner (CTCE) and Certified Fraud Examiner (CFE).
We are highly selective in our commitments and engagements. If you would like to discuss a potential investigation, please complete the form below. We also suggest reviewing our FAQ.