LEO Crypto Summit Event Recap

Earlier this month, TRM hosted the LEO Crypto Summit, an event for law enforcement and regulators, at the Kennedy Center in Washington, D.C. The event brought together law enforcement officials and investigators from Homeland Security Investigations, IRS-Criminal Investigations, FBI, DEA, U.S. Secret Service (USSS), SEC, CFTC, OFAC, FinCEN, and other federal and state agencies to discuss the use of blockchain intelligence to mitigate the risk of crypto-related fraud, financial crime and national security risks.

The full day summit was filled with briefings by law enforcement officials and panels on issues such as using blockchain technology to thwart cybercriminals, terrorist financiers, and drug kingpins. Panels included a deep dive on the North Korea threat with experts from the DOJ and FBI, what it takes to build a successful crypto-related prosecution with current and former prosecutors, and fireside chats with OFAC Director Brad Smith, CFTC Commissioner Christy Goldsmith Romero and FinCEN’s virtual currency lead Kevin O’Connor.

A Fireside Chat with OFAC Director Brad Smith

We kicked off the day with a fireside chat with TRM’s Ari Redbord and OFAC Director Brad Smith. Ari and Director Smith discussed the way that OFAC works with law enforcement on targeting, enforcement, seizures and other actions that enable the interagency to take down money launderers, cartels, weapons proliferators, human rights violators and other bad actors. While it is often difficult to criminally prosecute cybercriminals, who often come from rogue states like Russia and North Korea, OFAC sanctions and civil seizures are a way to punish and potentially change behavior even without a criminal prosecution.

Director Smith provided examples related to areas such as Russia, North Korea, terrorist financing and ransomware where the use of sanctions, combined with a criminal case, yielded successes and discussed the way that OFAC uses blockchain intelligence tools like TRM for targeting and enforcement.

For more on OFAC's recent use of sanctions to combat malicious cyber activities, check out our recent insights piece here. 

What DPRK hackers have taught us about crypto investigations

Next up was the North Korea panel, with the FBI’s Chris Wong, the DOJ’s Jessica Peck, and TRM’s Nick Carlsen moderated by TRM’s head of global investigations, Chris Janczewski.

According to TRM, state-sponsored cyber actors were responsible for $1.7 billion worth of cryptocurrency theft in 2022, more than three times 2021 totals. Two-thirds of those funds were stolen from DeFi platforms. According to the panel, thwarting North Korean cybercriminals is truly a team effort. From private and public partnerships in investigating DPRK hacks, to enacting sanctions and working closely with the DOJ and the National Cryptocurrency Enforcement Team (NCET) to work these cases. To dive deeper into DPRK’s ever-evolving cybercriminal activity and how law enforcement is disrupting North Korea’s crypto-crime and revenue generation check out our latest North Korea insights piece here.

What law enforcement is doing to combat pig butchering

In our session on pig butchering typologies and investigations, TRM's Taylor Windemuth, formerly of the FBI, moderated a discussion with Dave Smith, USSS, Carlos Orozco, IRS-CI, Patrick Wyman, FBI, and prosecutor Erin West of Santa Clara County and the REACT Task Force. Key takeaways included:

• State, local and federal agencies, along with international partners are encountering an increase in pig butchering cases. The IC3 2022 Report, found $2.57 billion of investment fraud is crypto fraud, a 150% increase from 2021, and experts suspect much more goes unreported;
• Deconfliction can be key to connecting many of these smaller cases to larger schemes and international crime organizations – for example, a set of smaller-value complaints submitted via IC3 were ultimately all linked to the same pooling wallet, ending in a $100 million+ seizure;
• International collaboration is key, as most pig butchering cases have an international nexus. Agencies are prioritizing having a robust footprint overseas, internally and with private industry partners
• Education and training, both for law enforcement and the wider public can help tackle this problem. Pig butchering scams usually involve powerful emotional appeals – these often include romance, a potential  change to their financial outlook, and the fear of missing out. If enough victims know what to look for, before or mid-scam, minimizing scammers’ returns can be an effective deterrent as well.

Check out TRM’s case study, which details a pig butchering case worked by the USSS.

The prosecutors: building a successful case with the use of blockchain intelligence

In another session, Ari sat down with Claudia Quiroz, Acting Director of the National Cryptocurrency Enforcement Team, Alona Katz, Chief of the Virtual Currency Unit, Brooklyn District Attorney's Office, and the Honorable Zia Faruqui, United States Magistrate Judge at United States District Court for the District of Columbia for a discussion on prosecuting and investigating cryptocurrency-related cases.

The all star panel discussed what is required to build a successful crypto-related investigation from a prosecutors point-of-view, building cases using blockchain intelligence, and working with agents and investigators to “tell the story of the money.” The group provided examples from historic cases.

Most of all, each panelist focused on the importance of building great teams across the interagency and utilizing the specific skills that each investigator and agency brings to bear.

How the DEA and HSI are using blockchain intelligence to disrupt the illicit drug trade

In another session, TRM's Kyle Armstrong, formerly of the FBI, moderated a discussion with DEA and HSI officials on how their agencies are using blockchain to disrupt fentanyl trafficking. The robust discussion with Minh Nguyen of the DEA and Erin Burke of HSI was a deep dive into how the agencies are using blockchain intelligence and other investigative tools to combat the drug trade going after darknet markets and other vendors.

Both agencies continue to build capacity domestically and collaboratively with partners. Erin also explained how HSI embraces technology to identify and mitigate online sale of fentanyl and Minh highlighted some of DEA’s successes targeting fentanyl precursor facilities overseas.

A fireside chat with CFTC Commissioner Christy Goldsmith Romero and FinCEN’s Kevin O’Connor

To end the day, Ari sat down for a fireside chat with CFTC Commissioner Christy Goldsmith Romero and FinCEN’s Kevin O’Connor to discuss how regulators work with law enforcement, and each other, to mitigate the risk of illicit finance in crypto.

Commissioner Goldsmith Romero pulled from her decade-long service at SIGTARP where she led a law enforcement office at Treasury which worked closely with law enforcement to investigate bank fraud and money laundering. Commissioner Goldsmith Romero focused on the need to mitigate the risk of illicit actors by strengthening anti-money laundering compliance controls.

Both panelists discussed the way they have worked together on actions and, most importantly, the way regulators can support the work of law enforcement through close coordination, intelligence sharing and deconfliction with both Commissioner Goldsmith Romero and Mr. O’Connor providing examples of joint actions and statements. 

The biggest takeaway from the entire summit? The need for close interagency collaboration and coordination. That was certainly the theme of this discussion.

‍