Blockchain is a digital, decentralized public ledger with a system that records transactions across multiple computers connected to a peer-to-peer network. It was originally developed for cryptocurrency assets like Bitcoin in 2008. Blockchain Analysis / Crypto Forensics creates transparency for a global blockchain-based economy, allowing banks, businesses and governments to have a common understanding of how people and businesses use cryptocurrency.

Below is a summary of how LEAs can leverage Crypto Forensics to create a debrief for a successful close of business.

• Viewing and Tracking Tools: The case management solution maintains user-friendly case tracking that has been developed for secure, convenient and collaborative use

• Broad Transaction Coverage: Ensures real-time information on all major blockchains and thousands of entities, currently attributing 90% of all active transactions

• Automated and Evidence-Based: Provides immutable historical data record with real-time updates and sophisticated risk assessment. Available via API license
Law enforcement / compliance officers can track and trace potentially illicit activities such as fraud, scams, security breaches, money laundering or terrorist financing using forensic cryptography tools.

Opinions and thoughts on cryptocurrency for retail investors.

In India, there are nearly 15 million retail investors, who are registered with various Indian cryptocurrency exchanges. Education is a must for retail investors before investing in cryptocurrency. Most of the cryptocurrency experiences price volatility of 15-20% in about a week and this creates anxiety among retail investors. Additionally, the Indian government has not defined cryptocurrency as a legal entity. However, due to the fundamental nature of cryptocurrency peer-to-peer transaction mechanisms, investors can trade cryptocurrencies without any third party knowing. How to protect yourself from such frauds Retail investors should look for the following indicators before subscribing to any investment program or advice:

• Is the company registered in India, if not, please avoid any financial transaction or bitcoin transaction

• Who are the owners – You will get the history of all the owners on the Internet and if the company has not declared their names on their website, stay away from them. Investors should invest 1 to 2 hours in basic research before putting their hard-earned money

• What is the cryptocurrency they are selling and from which online platform? There are over 1,500 cryptocurrencies around the world and not all of them have the technology or use case to meet their business needs. Investors should only target the top 10-15 cryptocurrencies for trading.

• Buy cryptocurrency in India from crypto exchanges that have a valid and transparent KYC (Know Your Customer) system in place. There are around 15 crypto exchanges that will qualify

• Don’t trust anyone here, be prepared to research any new technology and take action on it

• Indian crypto exchanges with valid KYC practice ensure investor safety, in case the crypto exchanges are hacked. Don’t buy any cryptocurrency from exchanges that don’t protect your digital assets.

• Finally, there is a multitude of wallets available on the market, propagated by private players. Investors should use at least 3 levels of password protection mechanisms (password, 2FA and google authentication) and not share passwords by mail or SMS / WhatsApp with loved ones.

Is there a grievance process for victims of fraud and what should they do if they are victims of it?

Since cryptocurrency has not been legally defined by the Indian government, there is no government recourse system available in India. However, independent bodies like Hyderabad Security Cluster and BEGIN India Think Tank continue to help investors if they get ripped off on a case-by-case basis. Significant fraud was reported to the police and filed as an FIR. However, due to the lack of capacity and capacity of LEAs and Indian forensic agencies, digital forensic evidence is not being recorded and most of the culprits have been released on bail in the respective cases.

Chinese Online Gambling Scams Case Study

High possibility of cryptocurrency paid as play money by Indian nationals to Chinese applications

August 2020

  • A Chinese national and three of his Indian associates have been arrested in a crackdown on an illegal online gambling racket run by a China-based company, police said Thursday. The Chinese national and his associates were arrested Wednesday by Hyderabad police from Delhi and taken to Hyderabad on Thursday.
  • The move comes a day after Chinese individuals and businesses were raided by income tax detectives in Delhi, Gurugram and Noida on suspicion of money laundering.
  • The online gambling was allegedly organized by various companies under the umbrella of the China-based Beijing T Power Company, police said, adding that transactions worth Rs 1,100 crore had been discovered.
  • A total of 1.24 crore in transactions were paid to Chinese online betting scam websites for a total of INR 11.00 crore by Indian nationals.
  • The active HSBC bank accounts were located at Gurugram One. A Chinese national, Yah Hao, operations manager of the online company, and three Indian nationals namely – Dheeraj Sarkar, Ankit Kapoor and Neeraj Tuli were arrested in their office in Gurugram.

Involvement of cryptocurrency

  • On average, the money paid by Indian nationals through banks to Chinese online gambling is quite low and is estimated to be between 150 and 500 INR per individual.
  • We suspect the possible involvement of the cryptocurrency paid to the Chinese online gaming company, by Indian nationals, which is not discovered in various raids carried out by ED.
  • A large amount of online play money is easier to transfer via cryptocurrency, as cryptocurrency transactions do not require any third-party bank to complete the transfer of funds.

How Hyderabad Security Cluster and HumanSTAR can help.

  • In association and with guidance from Hyderabad Security Cluster, HumanSTAR can provide exact details on the movement of cryptocurrency funds from one wallet address to another wallet address.
  • HSC & HS can provide detailed analysis of fund data which is transferred to Chinese online gambling application with details of country and crypto exchange.
  • For this to happen, HSC and HS will need a Bitcoin wallet address, transaction ID, and other cryptocurrency details from the police.
  • The arrested Beijing T Power Company employees will have all of these details in their official communication with customers or in the memo.
  • It may take 20-30 days for HSC and HS to provide proof of cryptocurrency involvement and detailed data analysis, once the respective details are shared by the police.

(This article was written by Dr Zaki Qureshey, Managing Director and Founder, Hyderabad Security Cluster, India’s 1st cybersecurity cluster)

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