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#cyberfraud | #cybercriminals | Reclaiming Your Stolen Crypto – A Fresh But Blurry Service Of Coinfirm


Following a recent Crypto-Crime report in 2019 $11,5 billion of cryptocurrency transactions have been misappropriated globally, which is an equivalent to the government budget of Latvia. It accounts for less than 2% of predicted value of global cybercrime anticipated to reach $6 trillion by 2021 of which the vast majority is laundered with traditional financial providers.

Until today, Crypto-crime victims had little luck with reclaiming their stolen, lost and defrauded Crypto funds. With the release ’Reclaim-Crypto’, the founders behind the London based Blockchain Analytics company Coinfirm as well as the corporate investigators and risk consulting company Kroll hope to provide a helping hand to both victims and members of law enforcement. However big the need for an effective solution in the space of Blockchain-based investigations, the details of their service, fees and process are yet to be clarified.

Historically, there have been hundreds of variations of financial scams that included cryptocurrencies in recent years but Coinfirm’s service claims to combine traditional methods of investigations performed by Kroll with Blockchain Analysis Tools. However small the chance might be to reclaim misappropriated Crypto assets, it offers the end-user an alternative way to take action besides awaiting steps being taken from national law enforcement agencies.

Besides organised groups which are believed to have defrauded at least $1 billion each. for a long period, some of the most common scams, which involved the average Joe, have been collecting hundreds of Euro and included for example: rent-offers of fully furnished dream apartments in Berlin, London or Stockholm offering unprecedented low rent. The scam has been using both lack of affordable housing in European capitals, greed and involved social engineering.

The scammers claimed that they, as landlords had to urgently move away oversees because of (fill in any logical reason), which forces them to rent out the apartment cheaply as soon as possible. Ones engaged into electronic communication, the suspect pretending to be an apartment owner, stated that he or she is currently moving abroad and transfer their bank accounts overseas so they can only accept a ‘reservation fee’ in Cryptocurrencies of couple hundreds Euro. There has been always a fake sense of urgency, underlining that there are multiple tenants queuing for this lucrative apartment and it is first come first serve basis, so the reservation payment has to be transferred nearly immediately. To reserve a dream apartment at bargain price, the potential tenants registered with cryptocurrency brokers, verified their identity, stated the cryptocurrency wallet address of the fraudulent landlord and most likely – never saw their money again.

As of today, even if victims reported such cases to law enforcement as Cryptocurrency transactions performed on the Blockchain are irreversible, victims willingly identified themselves and exchanged fiat to Crypto, the compliance teams of Cryptocurrency brokers has to usually issue statements displaying a time stamp of the transaction, the ID number and the Crypto wallet to which the funds have been sent. Such statement meant and still mean often dead-ends for less experienced police investigators.

Unless the transaction has not been executed yet by Cryptocurrency brokers, which happens more often than users might assume any refund or chargeback requests remained pointless as the users have willingly engaged in the transaction and Blockchain being a digital infrastructure doesn’t have a customer service or a technical possibility to perform refunds.

However, as the cryptocurrencies with the largest market cap remain pseudo-anonymous each transaction can be tracked on pages like Wallet Explorer or Blockchain  as their is a big likelihood that fraudsters would like to exchange the funds back to fiat-currency, which results in a chance of recovering the funds.

As Blockchain explorers remain difficult to navigate for unexperienced users, companies like Chainanalysis, Elliptic, Coinfirm as well as many others spotted a business opportunity for ’trusted partners ’to report fraudulent cryptocurrency wallets in which fraudsters have been collecting their funds. Ones such wallet address is being reported to such platforms, whenever a user would like to cash-out Crypto to Fiat, the brokerage services using such ‘Blockchain Analysis Tools’ due to mostly crowdsourcing able to block transactions and freeze the funds. With help of law-enforcement such frozen funds can be transferred back to victims. Such cases remain rare but are not uncommon.

’Reclaim Crypto’ on the other hand encourages users to submit their claims directly for nearly all 1300+ pseudo-anonymous Cryptocurrencies served as of today by ’Coinfirm Blockchain Analysis Tool’. The only visible exceptions are being made for full encrypted cryptocurrencies like Monero or Zcash which due to their full anonymity do not leave easily visible and easily accessible traces on the Blockchain.

Investigations on the Blockchain are possible but time-consuming. While investigating hacks or fraud certain cryptocurrency wallets can be identified and connected maybe not immediately to individuals but to reliable platforms like for example market-leaders like Coinbase, that performs KYC on their users. A potential investigator would have to identify the wallet, connect fraudsters-wallets and connected transactions to dedicated platforms and reach out to their compliance or fraud teams to potentially freeze cash-in or the cash-out possibility of dedicated cryptocurrency wallets. As there is none ‘Table of Contents’ of the Blockchain that connects different cryptocurrency wallets to different providers, such investigation is way more complicated than for example the connection between an IP and an Internet Provider. Such work requires extensive contacts in the ecosystem, trusted network and official requests via email and is mostly a time-consuming manual work of highly skilled and mostly well compensated investigators.

Following such extensive operating expenses, the size of misappropriated virtual assets reported to ‘Reclaim-Crypto;’ would have to be significant enough to justify investigators work and simply drive in profits for both Coinfirm and its partner Kroll. As Coinfirm’s claims that there is no minimum claim size and they will process any request to provide feedback to law enforcement their service remains interesting but doubtable from a business perspective.

Despite repeatable requests, Coinfirm has refused to comment if their product will involve an: initial charge, freemium, premium or any other kind of payment requested from the victim – as each review will be subject to individual price assessment users might doubt if it makes sense to go across the process to get rejected and face expensive costs. Furthermore, each claim has to be possibly reviewed manually to make sure that the ’real’ victim applies for reimbursement. As of today, Coinifirm’s claim-review-process requires the user to answers 24 form fields and upload documents. The review process includes open-ended questionnaires, will trigger the need to manually review submitted documents (which in the area of cybercrime are often being forged themselves and require a complex investigation) has to place an operational limits of the number of cases that Coinfirm might be able to handle with 54+ employees in total.

However, despite the complex claim review process, while requested to assess the statistical possibility that submitted and accepted user cases will be recovered, Coinfirm’s Co-Founder remains optimistic:

“Blockchain is the cornerstone of the most transparent financial system ever created. A significant amount of funds should be recoverable, it may, however, take substantial time in many cases, especially considering the weaknesses of different countries’ judicial systems and processes.”

Grant Blaisdell, Co-Founder at Coinfirm

From Coinfirm’s perspective, potentially each valid user-claim enriches their database of ‘flagged cryptocurrency wallets’ that allows gaining a competitive advantage in a more and more crowded space of providers offering ‘Blockchain Analysis Tools’. Kroll on the other hand might receive nearly free deal generating tool and pick up cases that would qualify for potential investigations. Both of which seems to be a fair gain for both Coinfirm as well as Kroll.

Despite their gain, in order for Coinfirm to grab a larger part of the $11,5 billion pie of misappropriated crypto funds and the average Joe to receive their reservation-fee for a dream apartment paid in Crypto that turned out to be a fraud, the service still represents a fresh breeze in the dusty area of Blockchain-Investigations. However fresh the breeze might appeal, the service as well as the FAQ section would clearly benefit from being less blurry as it remains doubtful that the cyber-cavalry of experienced, as well as potentially expensive Kroll investigators, will engage Interpol to help a user that has lost $20 value in crypto to reclaim their funds. Such potential false hope might be especially difficult for users originating from jurisdictions with weaker law enforcement structures as their small size fraud might enrich databases of private companies instead of getting the help which they desire.

Comment: As a follow-up contribution on this topic is planned, please contact the author in case you have used Coinifirm’s Reclaim-Crypto service and would like to share your experience.



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