Criminals are hiding their funds online – $3.5 billion in cryptocurrency seized

by mcardinal

Marion Bae, FISM News


The IRS Criminal Investigation division (CI) released its annual report for the 2021 fiscal year (FY 2021) on Thursday, which included some interesting insights about crimes involving cryptocurrency and plans for future measures against this growing form of cybercrime. 

The opening message from CI Chief Jim Lee states, “We are leading the world in our ability to track virtual currency in financial investigations…This year, a civil forfeiture complaint was filed for thousands of bitcoin valued at approximately $1 billion dollars, among the largest cryptocurrency seizures ever by the federal government.”

The report shows the total figures for tax crimes in 2021 as being $2.19 billion and other financial crimes equaling $8.18 billion. 

The cybercrime section of the report was filled with mentions of cryptocurrency, reporting that a total of $3.5 billion in cryptocurrency was seized in the FY 2021, equaling 93% of the CI’s total seizures. The Cyber Crime Unit (CCU) initially launched in 2015 with locations in the CI’s Washington, D.C., and Los Angeles offices. They have since expanded and have a Cyber Crimes headquarters office as well as cybercrimes coordinators in all 21 CI field offices. According to the annual report, they are planning to ramp up their efforts in 2022 by creating an Advanced Collaboration & Data Center (ACDC) in Northern Virginia to “bring together data, technology, and specialized personnel from across the Treasury and government to work on high impact solutions to protect the integrity of our tax and financial systems.”

The report lists four CCU “Significant Cases,” three of which are related to cryptocurrency. The first case mentioned was in relation to the $1 billion in bitcoin seized by CCU in November of 2020, as mentioned in Chief Lee’s opening message. The funds are thought to be related to the Silk Road case of 2015 and its creator, Ross Ulbricht. According to the report, Ulbricht was convicted of seven criminal counts, including money laundering.

The other two cryptocurrency cases mentioned related to “cryptocurrency mixing services,” which are used to hide illegal proceeds, aiding criminals in money laundering efforts. These cases were the April 2021 arrest of alleged Bitcoin Fog operator Roman Sterlingov and the 2020 sentencing of former Microsoft employee Volodymyr Kvashuk, who sold embezzled gift cards and laundered the funds through a cryptocurrency mixer. 

While cryptocurrency is solely virtual, the illegal activities it could be funding are not. In the case of Bitcoin Fog, most of the bitcoins moved originated in darknet marketplaces and were connected to illegal narcotics, computer fraud and abuse activities, and identity theft.

Cybercrime cases may be different from cases the CI has traditionally taken on in that they lack a physical dimension, but according to the report, “Special agents working cybercrimes investigations use the same ‘follow the money’ strategy that made the CI’s involvement in complex investigations a mainstay since the creation of the agency in 1919.” Considering that FY 2021 saw the largest federal government cryptocurrency seizure to date, this strategy seems to continue to work for online crime.