Crypto-crimewave forces police online to pursue ill-gotten assets

In July 2021, specialist police officers in Manchester swooped on an international cryptocurrency scam, seizing USB sticks and an online safe containing £16m worth of digital coins, mostly ethereum.

A month earlier, Leicestershire police had confiscated 10 types of cryptocurrency after raiding the home of a drug dealer who used digital assets to buy and sell class A drugs.

The Observer requested data from the 45 regional police services in the UK asking for a breakdown of cryptocurrency seizures since 2017. The information sent back by the 27 forces that responded reveals a big shift: there has been a significant increase in the number of raids, and a proliferation in the types of digital coin criminals are using to invest the proceeds of their activities.

More than half of the forces that responded seized crypto-assets during 2021, confiscating or restricting access to 22 different types of digital currency. This was a significant increase on 2020, when four types of crypto were seized, by eight police services. The figure was even lower in 2019, when only two types of digital currency were seized.

While the best-known digital currencies, such as bitcoin and ethereum, featured more than any others, the figures reveal the increasing popularity among convicted and suspected criminals of much less well known rivals.

In the Leicestershire case, police emerged with assets including Enjin Coin, Polkadot, Neo and even Chiliz, the crypto-tokens sold to football fans to enable them to access perks and vote on decisions at their clubs.

In Wales, the South Wales Regional Organised Crime Unit seized eight crypto-assets, including one called Cake, while its counterpart in the south-west confiscated seven, including the Luxury Coin.

However, Dyfed-Powys police, which patrols a mostly rural area in which Llanelli is the largest town, told the Observer it had taken possession of 82 bitcoins in 2021, with a value of £2.5m at the most recent price.

They decline to name the companies involved, citing security reasons; there is a danger of workers at crypto-exchanges being targeted. In 2017, Pavel Lerner, a UK-based exchange employee, was abducted by gun-toting men wearing balaclavas in Ukraine. He was only released after a ransom was paid. Every police service that responded to the FoI requests referred to this case as a reason why they would not disclose holders of seized cryptocurrencies.

In theory, the growing attraction of cryptocurrency to criminals is obvious. Large amounts of money can be sent across borders quickly, into jurisdictions that do not necessarily cooperate with UK law enforcement.

According to Grigg, though, criminals should not get overconfident. Transactions that take place on the blockchain are, by their nature, logged. That means, with the right time and resources, they can be traced, and perpetrators apprehended, long after crimes have been committed.

On the dark web, mixing services are available that allow criminals to launder their crypto, blending it with other types of assets to scatter the paper trail and throw investigators off their tail.

Yet as long as the crypto world is expanding rapidly, the challenge for law enforcement will grow alongside it.

A separate freedom of information disclosure, shared with the Observer, reveals a significant increase in reports of crypto-related fraud last year. There were 9,607 such reports made to the national reporting hotline Action Fraud last year, according to the City of London police, up from 5,581 the year before and 3,558 in 2019. Victims, who were disproportionately likely to be under 35 and male, flagged financial losses of more than £200m.

Ariss says British police are keeping pace, so far.