Updated: Apr 29, 2020
Sometimes it takes a village to crack down on crypto-crime. Katelgo Marite, a South African teenager, was kidnapped while he played with some friends near his home. A $120,000 ransom to be paid in bitcoins was demanded by his abductors. His family told police they had no idea what bitcoins were or how to meet the ransom demand. Thankfully, with the help of the community, police were able to bring Marite home safe and sound. CCTV footage from a neighbor’s house revealed the kidnapper’s car, which was then found outside a local bar where they interrogated possible suspects. It is not reported whether or not the ransom was paid.
Sadly, some victims are easier targets than others. Big holders of cryptocurrency are “low hanging fruit” for kidnappers seeking rewards in cryptocurrency. In the final week of 2017 Pavel Lerner, a cryptocurrency expert, was abducted near his office in Ukraine. The ransom demand to be paid was $1 million to be paid in bitcoins. At the time, Lerner was an easy target. As an executive of the cryptocurrency exchange Exmo, it was a simple task to track his whereabouts. Lerner was grabbed. The kidnappers knew there would be easy access to bitcoins to pay the ransom. The ransom was paid, and Lerner was released a few days later.
Typically crypto-ransom criminals go after holders of large amounts of cryptocurrency through kidnapping, robbery, or extortion. Unless a traditional fiat money system, no cryptocurrency bank can halt or take back a transfer of cryptocurrency. Criminals dealing in cryptocurrency do not have to tie their real identity with their bitcoin address as is required by traditional currency bank accounts. This means that while bitcoin transactions may be tracked, the actors behind the transactions are hard to verify.
Cryptocurrency related crimes such as crypto-ransom are becoming more and more common. Federal and local level law enforcement officials are creating divisions with virtual currency expertise. At some point, kidnappers will want to convert their ill-gotten cryptocurrency into a standard currency. It is at this point that law enforcement often has the best opportunity to discover the trail and “follow the money” back to the original perpetrators of the crime. As a financial medium, there are a lot of essential advantages of cryptocurrency.
I am a staunch advocate of cryptocurrency and all the good that its foundational technology can offer to better this world. Federal authorities in many countries are sending a clear message to crypto criminals that they are significantly honing their ability to catch them. Crypto crime task forces are now divisions with law enforcement agencies. New tools and techniques to de-anonymize suspects and detect unusual patterns in cryptocurrency transactions are being developed and mastered.
New laws and regulations are being enacted to protect the rights and benefits of individuals and arm law enforcement to be able to do what they do best to combat white-collar crime, money laundering, tax evasion, fraud, sales of illegal goods and services, extortion, and kidnapping, as we enter into this new chapter that will change the way we use money.