Fifty years ago, not many would have believed that soon, the world was going to get digitized to such an extent. Today, technology has made its way into every aspect of one’s life. Be it buying necessities like food and groceries or purchasing properties and transferring huge amounts of money, everything can now be done digitally.

In addition to online and digital payments, now, people also have the option of using cryptocurrency, which is a virtual currency. These days, investing in cryptocurrency has become very popular, and many new cryptocurrencies are being launched in the market. However, scams, frauds, and other cyber crimes associated with cryptocurrencies have also risen in recent times. And when crypto fraud occurs, a crypto investigation becomes necessary.

In this article, we will talk about cryptocurrency, frauds, and scams related to cryptocurrency as well as how to conduct crypto investigations.

What Is Cryptocurrency?

How to Conduct a Crypto Investigation: Best Practices and Tools 2023

A cryptocurrency is an alternative currency system that is digital or virtual. Unlike government-issued currencies such as the U.S. dollar or the British pound, there is no centralized authority to manage or regulate cryptocurrency.

Cryptocurrency is decentralized and uses encryption technologies and blockchain to verify and record transactions on a distributed ledger. Every crypto activity leaves behind a permanent, immutable trail.

Although cryptocurrency is not recognized in the same way as the U.S. Dollar is, crypto is legal in the USA and in other countries like Japan, China, Switzerland, Australia, etc.

What Is Crypto Investigation?

As with finances in every sector/form, no matter how safe the system is, criminals find a way to confuse the system and take advantage. There have been many cases of blackmailing, hacking, money laundering, and other types of scams in crypto. When a crypto crime is committed, crypto investigations are launched.

During a crypto investigation, trained investigators use advanced tools and technologies to follow the trail of the scammed funds. These investigators work with government and law enforcement agencies to pursue cyber criminals and bring justice to those affected.

Different Types Of Crypto

How to Conduct a Crypto Investigation: Best Practices and Tools 2023

Here are a few common ways in which one can fall victim to crypto scams and frauds:

  1. Scammers can pose as government officials or trustworthy people and manipulate a person to give away vital personal information. This information can then be used to hack their digital wallets.
  2. Some scammers may use dating websites to manipulate people emotionally. They may push people to invest in fraudulent cryptocurrencies or schemes under the guise of creating a future together.
  3. A lot of innocent people get scammed by people posing as influencers and celebrities. These criminals use the lure of giveaways to scam gullible victims.
  4. Scammers can blackmail people with personal secrets until they give the scammers their private keys.
  5. Scammers have also hacked the internal system of huge companies and asked for a ransom in cryptocurrency.

How To Conduct A Crypto Investigation?

How to Conduct a Crypto Investigation: Best Practices and Tools 2023

When a crypto crime occurs, the victim can contact a crypto investigation agency alongside filing a cyber crime complaint. A crypto investigator or a group of trained investigators will then be assigned to work on the case. Here is how one can conduct a crypto investigation –

Analyzing The Blockchain

Whenever a transaction is made using cryptocurrency, the related information is added as a block to the existing blockchain. This blockchain information can be found on distributed ledgers. This information cannot be edited or changed once the transaction is done.

Although cryptocurrency transactions are anonymous, the available information can be used to find out more about the people behind the crimes. The criminals may also try to use schemes like peeling chains, chain hopping, or mixing to make it difficult for people to trace them.

The investigators can use various advanced tools to analyze and group together certain transactions. This can lead them to identify the cryptocurrency addresses used by the frauds.

Identifying The Address

Once the address is identified, the investigators can then trace it to certain crypto exchanges and dealers. A crypto exchange is a business where crypto users can trade their cryptocurrency for other things, such as different forms of cryptocurrency, assets, or regular money.

Many people use exchanges and dealers to buy cryptocurrency. These businesses have verified the KYC data of their customers. Once crypto investigators can trace an exchange or a dealer in the trail, they can request them to provide information.

Unmasking The Perpetrator

As the criminals would have to have used many exchanges, the investigators can collect a lot of vital information through them. Then using the KYC (know your customer) data and open-source intelligence related to the suspect’s cryptocurrency address, the investigators can find out the real identity of the suspect.

Working Together With Law Enforcement

The suspect could be working alone or be a part of a gang. Once their real identities are traced, this information needs to be relayed to the cyber crime cell and the law department. The law department can then issue subpoenas which would legally force the criminals to appear in court.

Sometimes, the criminals may transfer the crypto funds overseas or flee the country themselves, making it difficult for the investigators or the police to catch them. So, it is very important to report the cases as soon as possible. This gives the investigators enough time to intercede and recover the funds.

Are Crypto Investigations Successful?

How to Conduct a Crypto Investigation: Best Practices and Tools 2023

A lot of crypto investigations have been successful, and many people have been able to recover at least some amount of their crypto funds.

One great example of this would be the case of the Colonial Pipeline ransomware attack, where the company’s software was attacked. The company had to pay 75 Bitcoins as a ransom. However, this process was overseen by the FBI, and they managed to recover 63.7 bitcoins in the end.

What Are The Best Tools For A Crypto Investigation?

Crypto investigators use many advanced tools and technologies to help them in the investigation process. Some of these tools are mentioned here –

  1. Elliptic – This is a blockchain analysis tool that helps regulate compliance and manage the risk of financial crime in crypto.
  2. Elementus – This helps organizations to unify and operationalize blockchains.
  3. Coinpath – This tool helps to trace cryptocurrency transactions.
  4. TRM labs – This helps to monitor, investigate and mitigate crypto crimes.
  5. Chainalysis – This is a blockchain data platform that helps government agencies, as well as businesses, engage confidently with cryptocurrency.


Cryptocurrency is becoming more and more mainstream, and it looks like it is here to stay. As more people invest in crypto and the market grows, unfortunately, crypto crimes may also grow. If a crypto crime occurs, a crypto investigation becomes necessary. Crypto investigations may help the law department trace the criminals and find their real identities, which in turn will help people get justice.

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