One of the reasons why people are skeptical about Bitcoin is that when a scam happens, it is virtually impossible to recover the funds. This is because the blockchain network on which Bitcoin and other cryptocurrencies run offers a decentralized and highly confidential platform for transactions. Basically, in a cryptocurrency transaction, what is transferred is not money perse but a specific code which cannot be retrieved once it is transferred. Also, processed transactions are stored on the blockchain and cannot be altered by any party. The only way funds can be retrieved is if the other party decides to make a refund. However, there may be another way.
Coinfirm, a blockchain sleuthing company, may just have some good news for crypto users. Last year, the company partnered with Kroll, a global investigations firm, to develop an initiative called ReclaimCrypto. This initiative uses latest blockchain forensic technologies alongside legal investigation and asset recovery to offer victims of Bitcoin scams a fighting chance to get their funds back.
How does it work?
Coinfirm fights money laundering within the crypto space by analyzing transaction histories through smart- and big-data analytics. It works with about 50 exchanges and has a built up a large database.
Kroll, on the other hand, is more direct and orthodox. They investigate Bitcoin scams by producing court orders to get an internet provider to reveal information about an IP address. They may even go deeper by using former FBI and CIA operatives to search the dark web for activity involving stolen funds. This may sound dark or illegal especially considering the confidentiality of the crypto space, but it is done for the greater good. It is important to point out that Kroll has worked with U. S. Securities and Exchange Commision (SEC) to uncover fraudulent ICOs. They have also helped to track down the perpetrators of Bitcoin scams and theft in Europe to the tune of $27.8 million.
If victims choose, Kroll can set up a third-party litigation funding for them. What this means that the cost of litigation will be borne by firms (e.g. Burford Capital or Therium) that finance the legal market. After the fund is recovered, these firms would take 30 percent of the recovered funds, while the victims keep the rest. Funds are not recovered without the permission of a victim. And a third-party litigation offers the victim the opportunity to recover funds without spending anything.
In a Coindesk article, the mechanisms of Kroll’s dark web operation was further revealed. Kroll Cyber runs a special dark web unit overseen by Keith Wojcieszek, a former head of the criminal investigations unit of the U.S. Secret Service cyber division. This operation crunches dark web data from various P2P sites. It can go into the dark web database with a wallet string and search for identifiers associated with the wallet — for instance, a conversation about selling stolen credit cards, or a criminal offering a service and providing the wallet as an address.
According to Benedict Hamilton, a managing director at Kroll, there are two paths that can be followed when investigating Bitcoin scams or any other crypto scam: (1) find out who did it, or (2) follow the money. The primary aim of Reclaim Crypto is to follow the money and recover the asset since that is what the client wants and pays for. However, following the money ultimately leads to figuring out the perpetrator, and the details of the investigation are channeled to appropriate law enforcement agencies to round up the scammers.
Depending on the information provided by the victims, a scammer’s address is marked as high-risk in Reclaim Crypto’s database. This database is continuously managed and updated by defining addresses from different blockchains based on off- and on-chain data. Reclaim Crypto defines an illicit address as one that has been linked to an illegal activity such as phishing, scamming, hacking, and so on. Addresses flagged as high-risk are subject to deeper analysis of asset inflows and outflows, and the paths of these flows are traced through transaction tracking.
This anti-money laundering (AML) platform can investigate multiple cases at the same time. This is because it is powered by a technology which detects the source and destination of stolen or misappropriated funds. However, cases are prioritized when it comes to forensic analysis and legal actions because these are complex, multi-phased procedures.
Reclaim Crypto said its focus would be on Bitcoin (BTC) and Ether (ETH), but will also cover coins like Ripple (XRP), Bitcoin Cash (BCH), Litecoin (LTC), NEO and DASH. The platform stated that investigating claims involving anonymous coins may pose a challenge but it isn’t impossible.
What has been done so far?
Reclaim Crypto was launched on 31 October, 2019 and has only recently started receiving claims data. They have conducted a number of fraud investigations, of which many were successful, while the others are still in progress.
At present, they are receiving claims from around the world and are gathering additional evidence, carrying out feasibility studies and reaching out to victims of already reported scams. As a result, a specific time cannot be given for asset recovery as each case has its own intricacies. However, victims that have submitted claims can check the status of their claims on Coinfirm website.
When claims are received, the platform analyses claims with the greatest potentials of being successfully resolved. It then goes ahead to catalog these cases based on their recovery potential — and prioritizes cases with maximum potentials. Finally, treating a case is governed by some factors such as number and value of all claims gathered, minimum threshold of stolen asset, jurisdictions of the victim and also the scammers, and initial analysis of the transactions (for example, whether stolen funds reached known exchanges or were held by a single address or spread across multiple addresses).
What are the requirements to make a claim?
Claims can be reported by a person or group of persons who has suffered Bitcoin scams and lost assets by sending them to wrong addresses, or through hacks, shut down or hacked exchanges, ransomwares, blackmails or fake coin offerings. Also, there is no limit to the number of claims a person can submit, neither is there any deadline for submission of claims.
In a case where a victim is not sure how their asset was lost, Reclaim Crypto would require any evidence that can support the description of the loss. This may include visual evidence such as screenshots of the platform with a visible cryptocurrency address, email correspondence, or any other helpful material. Further evidence may be requested in the course of the investigation.
Where the victim has sent an asset to a scammer or the wallet was hacked, the victim would be required to provide a screenshot of their wallet with their regular address, transaction history, address of the hacker (if possible), transaction hash (if possible), correspondence with the scammer (if possible), police statements or statements from other competent authorities (if possible) and other materials that may help the investigation.
In an event where the victim’s asset is blocked on an exchange and they are unable to withdraw it, the victim would be required to provide screenshots of the cryptocurrency exchange website showing the victim’s deposit address, name of the exchange, identity details (such as name, surname, email address and phone number), account balance information and full correspondence with the exchange support concerning the blocked asset. Further evidence may be requested during the course of the investigation.
Reclaim Crypto requests a proof of ownership to confirm that victims are the owner of the provided addresses. This is done with a cryptographic signature and victims are instructed on how to go about it.
The platform evaluates cases individually and prioritizes cases based on the feasibility of recovery, number of victims and value of claims. The feasibility of recovery depends on factors like the jurisdiction involved, cooperation given by law enforcement agencies, and the number of blockchain protocols involved. Therefore, there is no minimum threshold before a scam can be investigated. Reclaim Crypto provides support to victims even in the absence of a class action or coordinated proceeding.
User fees and charges
Reclaim Crypto prepares a custom offer and agreement depending on the case. Typically, fees are payable from the recovered assets and is dependent on factors such as value of the stolen asset, location, jurisdictions involved, cooperation of other relevant parties (e.g. the financial regulatory bodies) and the feasibility of recovery.
Eligibility to make claims
- Individuals who have lost their private keys to addresses are not eligible to make claims. Private key recovery is currently outside the service of Reclaim Crypto.
- Individuals who cannot access their wallet or account on an exchange due to a lost 2FA key are not eligible to make claims. However, if the individual is a victim of a hack where the 2FA was used or deactivated, then the victim can submit a claim.
Individuals who lost their private keys, seed, and or password to a wallet are not eligible to make claims. But if the individual is a victim of stolen seed, private keys, then they can submit a claim.
You can find more details in Xtrgatescam