Public Key Podcast

Investigating the World of Pig Butchering And Crypto Scams: Podcast Ep. 72

September 5, 2023 | by Chainalysis Team

Episode 72 of the Public Key podcast is here! We’ve all received that random text message, that seems like a wrong number, but is actually a calculated attempt by scammers to drain your life savings via cryptocurrency. In this episode, we speak to Detective Matthew Hogan (Connecticut State Police) who is on the front lines of combatting pig butchering and other related crypto and traditional scams.

You can listen or subscribe now on Spotify, Apple, or Audible. Keep reading for a full preview of episode 72.

Public Key Episode 72: Pig Butchering, Crypto Scams, and New Digital Asset Regulation in Connecticut 

Pig Butchering scams are one of the leading crypto-related scams in the world with scammers monopolizing the $2 billion scheme. 

In this episode, host Ian Andrews (CMO, Chainalysis) speaks to Detective Matthew Hogan (Connecticut State Police) who is on the front lines tracing crypto and combating pig butchering and other crypto crimes.  Detective Hogan talks about the evolution of crypto scams, the challenges law enforcement faces in investigating these cases, and the recent Digital Assets legislation in Connecticut regarding crypto kiosks.

He also shares his experiences in conversing with scammers to gather evidence and better protect consumers, while highlighting the importance of collaboration between law enforcement agencies and crypto exchanges. 

He even talks about emerging traditional schemes that scammers are going back to in the wake of crypto crime crackdowns.

What is the Pig Butchering Cryptocurrency Scam?

“Pig butchering” is a term used to describe a scammer that takes a slow and calculated approach usually via friendship or romantic connection before obtaining money/crypto from victims. The phrase alludes to the practice of fattening a hog before slaughter.

Many of the criminal organizations are based out of Southeast Asia and crime was exacerbated by the pandemic restrictions on travel in Asia, which saw large gambling compounds and resorts financially decimated due to no gambling activity.

Criminal organizations coerced professionals looking for employment in places like Laos and Cambodia to come to these resorts for high wages and such professionals were forcibly confined and ended up being human trafficking victims themselves.

Those human trafficking victims are then forced to scam vulnerable individuals from around the world using dating, messaging and social media apps in order to make initial contact with their victims.

The scheme uses a variety of legit crypto exchanges, fake crypto websites and false earnings to perpetrate the schemes and eventually dupe victims out of their money and crypto.

Quote of the episode

“The fraud hasn’t really changed that much, right? Originally the grandparent scam was, ‘Hey, put $100,000 in a shoe shoebox, wrap it in duct tape, cover it in newspaper, mail it to this obscure address in Pennsylvania, and then that’ll be your bond money, right?’ Now that changes. Now you go to a crypto ATM machine and put some cash in and do it that way.” –  Detective Matthew Hogan (Connecticut State Police)

Minute-by-minute episode breakdown

  • (2:35) – Detective Matthew Hogan’s first law enforcement  experience with cryptocurrency
  • (5:04) – Experience engaging scammers in pig butchering and other cryptocurrency investment schemes
  • (9:35) – Legislation in Connecticut regarding crypto kiosks and its implications
  • (13:06) -Challenges in getting crypto ATM operators to protect consumers
  • (16:05) – What got left out of Connecticut’s Digital Assets Act 
  • (18:02) – Sourcing, training and recruiting top crypto talent for law enforcement 
  • (21:05) – Uptick in cheque fraud and other postal related scams and robberies 
  • (24:37) – Highlighting Erin West and the REACT Task Force work in national and international investigations 

Related resources

Check out more resources provided by Chainalysis that perfectly complement this episode of the Public Key.

Speakers on today’s episode

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Transcript

Ian:

Hey everyone. Welcome back to another episode of Public Key. This is your host, Ian Andrews. Today we’re going to talk financial crime. We’re going to talk pig butchering. I’m joined by one of the experts, Detective Matthew Hogan from the Connecticut State Police. Matt, welcome to the show here.

Matthew:

Thanks for having me here. Happy to be here.

Ian:

You know what, before we jump in to the pig butchering details, I’ve got to ask you about the photo over your shoulder here. You’re shaking hands with somebody famous. Tell us about that photo.

Matthew:

This is the world famous Frank Abagnale, Jr. from Catch Me If You Can, if you haven’t seen the movie or read the book. I got to meet him in person at one of his talks. It was a fantastic opportunity.

Ian:

For people that haven’t seen the movie or the book. Frank was kind of the original financial fraudster, I think. Prolific in his check passing schemes, I guess, is what he was most known for.

Matthew:

He was a check kiter. Yeah. I forgot how many millions of dollars, what he did, within his timeframe as a juvenile around the country and then into… yeah, wind up getting caught in France.

Ian:

Well, and I think it’s an interesting segue into the episode, right? Because a lot of the work that you do today is the modern day equivalent of check kiting, right? It’s all sorts of crypto scams and SIM stealing and things like that. Tell us a little bit about what you spend your time on at the Connecticut State Police.

Matthew:

So I think what we’ve mostly noticed is that the type of scams haven’t changed that much. It’s mostly the vehicle that they’ve used, right? So originally they were using checks or domestic wire transfers, but as the proliferation of crypto came about, they started using that as the method to move their money and kind of launder.

Ian:

Yeah. When was the first time you saw cryptocurrency in a case? Do you remember?

Matthew:

I want to say probably 2017. Something came through and we weren’t ready for it yet obviously. I had actually gone to the National Computer Forensic Institute down in Alabama and took their crypto course. So I had an understanding of it at the time, but it was so new in our agency and just in law enforcement in general that it was kind of one of those things where you’re like… especially at the state level and local, you’re not really seeing these cases. It was usually the fed’s getting them. So we saw it come in and we’re like, “I don’t know what to do with this.” So.

Ian:

What did you do? So you saw it come in and then what happened next?

Matthew:

I actually had software through NCFI at the time, so I was trying to trace it out with the software that we acquired at that point for free through the training. I didn’t know what to do with it once I traced it. You’re like, “Now what do I do?” I found to go someplace. I’m not sure if I’m even tracing it the right way. So you’re like, “Hey, I did what I could with it and it’s attached to this BC1 queue and there we go.”

Ian:

Yeah. So I am going to take a guess based on following you on LinkedIn for a while that you’ve made some progress on your level of sophistication because you’ve made some big impact for victims out there. Talk about maybe the evolution from that first case where you’re not even sure if you’re tracing it right to capabilities that you have today.

Matthew:

Yeah, it was interesting timing. My partner, Mike Lebowski and I were kind of just talking and we had been discussing the issue of crypto and we’re like, “We need to really try and do something about this. Our agency isn’t doing anything with it currently. We need to try and get up to speed with it.” So we took the bull by the horns literally and didn’t get in trouble for it, but we approached our command staff like, “Hey, we really need to address this.” We were lucky enough that our command staff here at our agency was open to the idea. So we just started talking to Chain Analysis and other companies and talking to experts in the field, IRS CI guys, FBI, U.S. Secret Service Marshalls, and we’re like, “Hey, what are you guys doing with this? How should we start building our program?” So they kind of gave us the foundation. We just we’re looking at how our agency was using it and what we could do and partnering with you guys was a big part of that.

Ian:

Yeah. Now, I mentioned I’ve been following you on LinkedIn. One of your posts recently, you mentioned that you had finally gotten one of these texts, the wrong number texts that start the pig butchering engagement and-

Matthew:

We’re waiting.

Ian:

That’s right. You said in the post that you were starting to converse with the subject and you were going to use it basically as a evidence gathering tactic. Give us the follow up because it’s been a few months. How far did you get in the conversation?

Matthew:

So it was really interesting because really I wanted to use it as a learning experience, right? You want to really understand how to communicate with the victims so you can really get the feel for how these people are getting scammed, right? Because you hear it all the time. People will go, “Oh, how can you fall for such a thing?” Right? But over the course of several months, you can really understand that they’re texting you throughout the day and they’ll end conversations with sweetheart and stuff like that. So they’re really trying to build that relationship. After about a little over a month, I started getting frustrated with it. So I just persisted like, “Hey, you mentioned gold a couple times and investing in gold. How do we go about doing that because I’m kind of curious?”

So that spun the conversation and she wound up giving me what I wanted, which was the investment sites through the exchanges that they were using. It was called FXSIX, which is an app on the Apple platform. They wanted me to go through a couple of defi web wallets in order to transact on there. She was giving me the how-to because I was playing dumb, I don’t know what Bitcoin is, how does it work. It was really honestly a lot of fun. Trying not to make fun of it because your victims go through that kind of stuff. But it was just a great learning experience listening to the heart of communication and understanding the scam.

Ian:

So the scammer wanted you to actually download an app that was in the App store.

Matthew:

She told me to go to a U.S. base exchange, open an account, explain that to me. Then once I got there, she wanted to me to go to another exchange and basically connect the wallets and then transact my money from FI to my current exchange and then sent to my defi wallet, the other exchange. Then on that platform you could use the web browser to search for the FXSIX and then search there. So it actually was interesting because then I did it IC3 search for that particular browser, for the FXSIX, and I found a ton of other victims that were all victimized by the same FXSIX account.

Ian:

Yeah. I’m curious, when you find somebody like that, obviously you’ve got the resources of law enforcement at your disposal, you collaborate with the Secret Service and the FBI as you mentioned. Is there opportunity or a path to take down FXSIX? Does that even make sense in terms kind of pursuing the criminal element behind some of these scams?

Matthew:

I think it does, but the problem with a lot of them are, there’s one right behind the next one, right? So once this one gets shut down, they already have a back one ready to rock and roll. Our goal is to just like Aaron West says, to freeze, seize and disrupt, right? We want educate and disrupt. So I really want to disrupt as best I can. That’s definitely a methodology to it. So if we could get to that point, it’d be great. Because there are enough victims out there for FXSIX for sure.

Ian:

Yeah. I’m curious, have you seen from a victim standpoint. I think when I first started learning about pig butchering last year, it seemed like most of the criminals were operating out of Southeast Asia. So Myanmar, Cambodia and Laos seem to be the concentration, but more recently I’ve heard that there’s actually quite a bit of domestic activity. Our friends north of the border in Canada, the Calgary Police, they told me about a case where they were actually able to trace funds to a criminal organization operating out of Montreal.

Matthew:

Oh wow.

Ian:

Who had scammed, they were running kind of an elderly scam pig butchering methodology involving crypto. I heard from some of the Queens District Attorneys in New York that they’re seeing gang activity in the Borough where they’re running financial scams. So I’m curious, are you seeing this in Connecticut as well? Is it moving domestic or you feel like you’re primarily still seeing criminals operating from offshore?

Matthew:

The pink butchering scams are always offshore from what we’re seeing. When we’re looking at other stuff, domestic side, it’s more so like PII or cards or stuff like that. So it’s interesting. We’ll have a case that has nothing to do with crypto, but as you dig deeper, you wind up finding that there is somehow a portion of it that is crypto related. So they’re using it as a way to obfuscate their money or something.

Ian:

Yeah. Now shifting gears a little bit, one of the things that you championed was legislation that was recently passed in Connecticut that deals with crypto kiosks. Can you talk a little bit about what you worked on there and what the implications are?

Matthew:

Yeah. So we started to recognize obviously there’s been an issue with the kiosk ATM machines involving crypto scams with the elderly and older population, specifically in Connecticut obviously. So we tried to address it in some manner. So I actually reached out to some of our partners with the ARP, our Coalition of Elder Justice in Connecticut, and we started just kind of discussing what we could do to really fix that problem as best we could because it’s more on the regulation side, right? So it’s a civil issue, not so much criminal, the regulations that we are working on. What we attempted to do was we wanted to get the ATMs under a money transmitter license so that in Connecticut they have to be following the same regulations as regular ATM machine would.

So part that was part of the issue was getting the definition changed, which we were able to do, get them as a money transmitter. Some of the other things that we wanted to do were work on the transaction limits. We wanted to work on… Obviously the biggest problem with autos is the fees, right? You’re talking a victim gets between 5 and 20% of a fee. They’re sending Bitcoin to their scammer, they’re getting charged say 35,000 for a $20,000 Bitcoin. So there’s a huge markup. So if we do recover assets for them, they’re already going to be at a loss because of the fees that they’re getting charged. So those are some of the big issues we were trying to [inaudible].

Ian:

Yeah. Making sure that the operators aren’t profiting off the scam activities seems like a good goal.

Matthew:

Right.

Ian:

One of the provisions in the bill that surprised me a little bit is this right of refund that you’re able to get in the legislation, which is… I was curious about how that works practically because obviously there’s not a reverse transaction in crypto like there is in traditional banking system.

Matthew:

It was interesting. I didn’t include that into our original draft for what we were attempting to do because we know that that’s not an option really for crypto. Then it’s funny too, because if you read the full law, there’s the section where it tells you that it’s non-refundable, but then later on in the statute it talks about how they’re requiring within 72 hours at the operator’s own expense to refund. There’s two caveats that where they say if the customer’s first transaction and if the wallet or exchange is outside the U.S. So those are two big variables obviously. I’m curious myself how they’re going to accomplish that.

Ian:

Well, I like the idea of putting a penalty on the operator when maybe they’re allowing transactions that are somewhat obviously fraudulent. That first transaction idea to me actually sounded really novel. I feel like there could be some really positive impact from that approach.

Matthew:

The way I originally worded it was I was trying to target the older community. So per definition that’s 60 plus in Connecticut. What we wanted to do was basically we want these companies to obviously use KYX. So when that company determines that that user is 60 plus, we want them to immediately freeze that transaction prior to even being sent. We want them to verify the transaction over phone before it occurred.

Ian:

Yeah. See, I’ve actually had this conversation with some of our customers who operate crypto exchanges as well, that there’s an opportunity to sniff out scams even when the address that maybe someone’s requesting a withdrawal to isn’t an obvious scam or an existing known scam. If you have a customer that just signed up first time depositing fiat into an exchange, just bought crypto and you’ve KYCed them and they fit a particular demographic profile, elderly being one of the more likely to be in a victim of a scam obviously, maybe put a limit on that withdrawal, right?

Matthew:

That was our goal.

Ian:

Or put a time lock on it or just additional verification checks to protect people that are more likely to be victims, right?

Matthew:

That’s our goal. The part we’re happy about is we got something on paper, right? So we got some changes made and this is just going to be an opportunity for us to build off of at this point. So we have really good legislators that were bipartisan that wanted to work on this with us and we’re really happy about that. So we’re hoping that we can make some more changes in the future.

Ian:

That’s great. I know that Chainalysis has some ATM operators that actually use our transaction monitoring solution that are MSB licensed. So I don’t want to paint the entire category as being, oh, this is just a mechanism for money laundering. But there’s also a lot of operators out there that don’t do that. Do you have any sense of how many ATMs or kiosks are now operating in Connecticut?

Matthew:

It changes. It almost changes daily it seems. At last count, I want to say there was about 480-ish, thereabouts. That changed with Bitcoin of America obviously when that happened. We lost a bunch from that. But I want to say about 480-ish. Like you said, a bunch of them are better companies. We deal with them via email a lot of times and they’re willing to help us. So you can’t broad brush them.

Ian:

Yeah. The scam that I’m imagining here that probably has a nexus around these ATMs is my grandparents have gotten phone calls from somebody that’s impersonating me saying, “Ian’s been in a wreck. He’s at the hospital. You need to send funds right now so we can put him into surgery.” Or, “Ian got arrested for DUI. If you don’t send us money immediately, he’s going to get sent to jail. You need to bond him out.” Fortunately, my grandparents were savvy enough to know, call me before sending money anywhere and I answer the phone and they’re like, “Hey, are you in jail?” I’m like, “No.”

Matthew:

With my cellphone?

Ian:

Yeah, exactly. So they’ve never fallen victim to it, but I’ve always assumed that the next step in that had they taken the bait would be directions to go buy gift cards or go find one of these crypto ATMs and send somebody money.

Matthew:

100%.

Ian:

Is that what you see usually?

Matthew:

100%, yeah. Like we said earlier, the fraud hasn’t really changed that much, right? Originally the grandparent scan was, Hey, put $100,000 in a shoe shoebox, wrap it in duct tape, cover it in newspaper, mail it to this obscure address in Pennsylvania, and then that’ll be your bond money, right? Now that changes. Now you go to a crypto ATM machine and put some cash in and do it that way. So it definitely hasn’t changed much. It’s just they’re using a vehicle, right?

Ian:

Yeah, yeah. Sorry, one second. My dog was trying to get in and out of my office there behind me and it distracted me a little bit. You did mention in the posts on this act concerning digital assets that there were a couple things that didn’t make it into the final text of the bill. What were some of the provisions you were hoping to get in there that didn’t make it through the legislative process?

Matthew:

You sniffed out the first one right away. So first of all was that idea of having a transaction limit for a specific community of people who are more likely statistically victimized. So we wanted that 60 plus to be a target for blocking scams. So that provision got modified to this new one where they’re basically saying a 72 hour transaction return. So that was one of them. The other one was do the dollar limit. I wanted it to be around $500. I know FATF has there is about a thousand for the travel rule. So I was trying to keep it within that range of what FATF recommends, because obviously there’s a coalition of people who believe in that dollar amount.

From what we’re seeing, a lot of the victims here, $2,500 is a lot of money for some of the elder community. Then if you talk daily limits, now we’re talking $2,500 a day, that could be a lot. So I wanted that dollar limit lower. It’s basically to create more of an issue for the scammer, right? If the more chances that that victim has to go to the ATM machine to make these transfers, the more likely they’re going to go, “Wait a minute. I think I’m getting scammed.” So trying to lower that transaction was a big one that I wanted to fix.

Ian:

I think most normal ATMs, you have a transaction limit of about $500 a day in cash in the U.S., right?

Matthew:

Right.

Ian:

So it seems like getting consistent with that would’ve been the target. It’s interesting they ended up with a higher number for the crypto ATMs.

Matthew:

Yeah. My other thought was if I’m going to be transacting $2,500, why don’t I just go to a Coinbase or Kraken and do a transaction through my FI in that way? What do I need to go to ATM machine? So that was-

Ian:

Yeah, exactly. I have to admit I’ve never used a Bitcoin ATM. It never struck me. I see them in gas stations and I’m like, “I don’t know that I want to be doing any financial activity in the same place that I’m buying a three day old hotdog.” That doesn’t-

Matthew:

Right. Neither of them are good.

Ian:

Yeah, exactly. Nothing good is going to come of this being in this place doing this type of work. So once the act has been passed, is it fully implemented now? Are you seeing any benefits from it in your day to day?

Matthew:

I think it’s going to actually take effect October 1. So we’ll see some changes now, but I don’t know. I guess the problem really is how quickly these institutions and these companies can really get on board with what the recommendations are from the regulations. So I think that there’s going to be some lag with that, but I’m hoping that the companies that are more legitimate will probably be able to pick up the pace a lot faster with them. So hoping to see that.

Ian:

We’ll keep an eye on that as we go further. But it feels like this bill may be a model that other states can follow as a way to at least cut off one of these vectors for exploitation, which is great. There was some news this week, one of the big exchanges KuCoin came out and said, “Hey, we’re going to mandatory KYC pretty soon.” I think the deadline was maybe the end of July. They’re going to require all new customers to provide identity, and existing customers are going to have trading limits imposed until they go through KYC process, which was a huge turn for them. They were kind of the last big holdout on this topic, right?

Matthew:

Yeah. This was a blessing for us. I’m really hoping to see that they go through with verification on their customers. But the bigger issues, will they respond to U.S. law enforcement? Because that’s the biggest question. Yeah. Just like, oh boy, none of them want to talk to us typically for investigative purposes. So that’s been the biggest challenge.

Ian:

Yeah. Do you see that being widely divergent across the crypto ecosystem where some organizations happy to collaborate with law enforcement and others kind of just never engage?

Matthew:

Yeah, it’s prolific. We can really see such a drastic change going from specific exchanges to exchanges. We know which ones, when it goes to a certain exchange, we’re like, “Ugh, dead end.” It’s very frustrating because we obviously want to do the best we can for our victims here. It goes to these certain exchanges that aren’t accepting KYC or respond to U.S. law enforcement, it really puts a hamper on our investigations.

Ian:

It seems like in my time at Chain Analysis, so kind of two and a half years in, there’s been a market trend from not only shifting towards KYC but also eagerness to collaborate with law enforcement. I mean, we’ve seen a lot of exchanges kind of hiring up investigative teams who are big global actions, not just on scam activity, but on counter-terrorist financing and some of these other CSAM where it seems like there’s collaboration, at least for me as an outsider. I’m curious if you feel that from a law enforcement perspective.

Matthew:

We do. I think we recognize, or at least these companies recognize, hey, if I want to be regulated appropriately by the U.S. or the UK or wherever, they need to have proper measures in place and have those opportunities to have KYC and AML and BSA regulations properly in place. So we’re definitely seeing it on the back end. I follow the same stuff I think you do. So we’re seeing these guys get hired. IRS CI, I mean, if you work there, your chance to do getting hired at some places is pretty good at this point I think, so.

Ian:

Yeah, yeah. That actually brings up an interesting topic too is staffing. So you talk about the guys at IRS CI that are now kind of leading investigative teams at some of the big exchanges out there. How is your ability to hire and recruit into your organization with the expertise you need to really work these type of cases?

Matthew:

Recruiting for law enforcement is such a challenge. There’s so many nuances to it these days. I think the overall view of law enforcement has changed so much, the public eye, to negative unfortunately, that it really has created a challenge for us. We don’t have the opportunity to really grab hold of candidates that have an expertise in maybe crypto or even financial crimes to that matter. So it’s definitely been a challenge for us to fill classes as a whole even and as nationwide. That’s not just us at our agency. I think that getting out there and getting messages like this one out to the public saying, hey, listen, we’re really trying to do our best here to fight crime and we need good candidates that want to do it for the right reasons has been hard.

Ian:

If I’m interested to join your team, I’m like, “Hey, I want to go protect people. I want to help serve the community. I don’t know anything about crypto.” Do you guys have the capacity to train people up and get them to where they’d be effective collaborating with you on some of these financial crimes cases?

Matthew:

Yeah, I think we’re there. Myself and Mike Lebowski, who I mentioned, my partner in this, we’ve been lucky enough with our command staff’s approval to really go out and train even local law enforcement here in Connecticut. So we’ve been out and doing trainings as best we can to our own capacity. Because we’re not experts by any means, but we’re at least doing it. So if someone were to come to our agency and did express interest, we would definitely take that full on and help out.

Ian:

Well, there we go. That’s a career path, right? Join your organization, get smart on cryptocurrency, work some cases hard for a couple years and then you’ve got a potential career path.

Matthew:

Please do.

Ian:

Yeah, there we go. We’re going to get some people interested, I feel. We had my colleague, Joe Zar, who’s reserve detective still, but former officer in Southern California on the podcast last year. He talked about his experience. First time he heard about crypto, I think he was getting his MBA and some of his classmates started telling him about Bitcoin back in 2016, 2017. His initial reaction was, “Oh, there’s got to be criminals using this.” So he went back to his colleagues in the police department and said, “Guys, we got to go look at this because I think the folks we’re chasing are probably involved here somehow.” His comment was at the time he was actually kind of laughed out of the room. They were like, “That’s not what we do.’ I’m curious if you initially met similar kind of reception when you first started looking at crypto and has that improved or changed over time?

Matthew:

It’s definitely improved over time. I think media obviously helps with that because they’re pushing the message out there that it’s more people are taking on more. But 100% originally, even now, we still get it occasionally. Go to a local PDs more rule, they’re like, “Oh, that’s plain money. We don’t deal with it.” But we’ve seen people are accepting it more in law enforcement now and we’re getting some help now. So it’s been a good learning experience for everyone.

Ian:

Yeah. Talking about local PD. Our friends in Calgary, they just launched this initiative to really get a training academy going. I think it’s open actually to people, not just in Canadian police forces, but all across North America. They’re hoping to offer training in this area because one of the things they observed was if you’re a victim of one of these crimes, it’s hard to come forward, right?. You’re embarrassed. Once you’ve realized you’ve been scammed, you’ve lost money and you don’t really want to talk about it. So it takes a lot of guts even to come to the police.

Matthew:

Come forward.

Ian:

Then unfortunately, if you walk into your local police precinct, the person sitting at the front desk may think crypto’s ridiculous or that it’s your fault or have some perspective or just think it’s impossible to solve, like once you’ve sent them money, there’s no chance of getting it back. So they seem to have put a big emphasis on let’s make sure that at the very front lines, at the local level, we have some experts that can intake these cases effectively and then hand them off to the people that can actually do tracing and file a fund seizure. Are anything similar happening in Connecticut? Have you attempted to get that local level up to the similar ability?

Matthew:

That was our goal, because the reality is my buddy and I are the only two doing it for Connecticut, and this isn’t our full-time job. We have other responsibilities, our actual cases that we work. This is something that we’ve kind of taken on because we’ve noticed so much. So our goal was to educate as many people as we could. So our model basically is now, which we’ve changed, is once they get a case from local PD, we’ll actually go to them, show them the ropes of how to write the search warrants appropriately, show them how to open source things and then kind of give them the ball. We’ll give them the policy and paperwork to do the product themselves in hopes that they can start their own programs internally there.

Ian:

Yeah, that’s amazing. I mean, this is something that I’m pretty passionate about is how can we get everyone that may be on the receiving end of a victim of one of these cases to have at least a baseline knowledge of, okay, what can be done with crypto, what are the indicators that maybe there’s a path to retrieving some of these funds and make sure that we’re getting those reports into the hands of people that have the ability to take action as quickly as possible. Because it seems like time is of the essence here too, right?

Matthew:

The key to all this is time, the time to trace is 100% to find those assets. Because the biggest problem we’re seeing, especially with pig butchering, is the delay in reporting, right? So you have delay of the victim line report because they feel that reluctance, embarrassment, but then you also have law enforcement going, “Who do I give this to?’ So there’s this extended time delay challenge.

Ian:

The more time that’s elapsed, the more likely that the funds have left an exchange that’s likely to respond to a subpoena and they’re out into the ether somewhere.

Matthew:

100%. Yeah, talking days or weeks and that money’s gone.

Ian:

Yeah. I’m curious here. We’ve been really focused on crypto obviously since that’s the topic of this podcast, but I’m imagining you see other types of financial crime, scams, frauds. What else is keeping you busy these days?

Matthew:

It seems like people have watched this movie recently because there has been an uptake for sure in check frauds.

Ian:

Really?

Matthew:

The mail theft has been a huge thing and they’re doing it for check thefts. They’re doing robberies for the U.S. Postal, like arrow keys.

Ian:

Wow.

Matthew:

That’s probably the biggest that we’re noticing is a lot of check frauds popping back up, but then there’s also new account fraud with credit card accounts or with banks. We’ve seen some home equity line of credit frauds that-

Ian:

Wow.

Matthew:

So yeah, there’s definitely a wide variety. I think what happens is scammers recognize people paying attention to certain technological scams, and we’re like so laser focused on trying to figure it out that they go old school and go back to something like he’s been doing for or was doing for two years, and they’re like, “Oh, no one’s paying attention to this right now. Let’s start doing this again.”

Ian:

I’m actually blown away that it’s going back to check fraud because I’m trying to think the last time that I wrote or received a check. It’s a pretty rare thing, right?

Matthew:

Right.

Ian:

Yeah. I suppose maybe that’s not true for everybody, but that’s really interesting. I do know though, in my neighborhood, the postal service actually has taped over a lot of those blue boxes that are on the corner and basically said, “Don’t use these anymore,” because we had a rash of thefts. So I think that’s what you were talking about with the arrow keys, right? This is how you can open the mailbox, right?

Matthew:

All the mailboxes, yeah. So they’ve done a really good job of trying to prevent them as best they can. They have changed boxes out to stop the fishing. They’re doing the best they can to model keys and stuff like that, but it’s been a lot of work for them to do.

Ian:

Yeah. So then you steal the mail, you get somebody’s identity or an application form for a home equity line of credit or a credit card, and then you just go open that up and run with the cash before someone even notices that that funds are being drawn down against it.

Matthew:

Yeah. They’re getting a check right out of the mail and they just wash a check.

Ian:

Yeah. Man, criminals are innovative. If we get these people focused on doing good instead of [inaudible].

Matthew:

Good. Right, exactly. It’s always our argument.

Ian:

Oh man. Our mutual friend Erin West, you mentioned her earlier, she’s got the react task force happening. I know there’s some collaboration that happens between the states. Can you talk a little bit about… I think one of the biggest challenges in all fraud and in particular with crypto is that it’s global in nature, right? It doesn’t respect our nice state boundaries or even our national borders. Crypto doesn’t care.

Matthew:

No.

Ian:

How do you work across state lines with federal jurisdiction or other states when you see these types of cases? Is there anything that we can suggest or do to improve that collaboration?

Matthew:

I really thank God for Erin West. She’s been such a bull in this area. She’s got the message out and she is really trying her best to educate the masses. That’s really the key to all this, I think. If we can just educate across the board and because the problem we talked about is time, the delay in time. So if we can get those smaller PDs educated on this and get the message out, and then they can educate their communities on it, that’s really what the key is to all this is getting that message to the civilians.

Ian:

Yeah. Well, Matthew, this has been an awesome conversation. I’ve really enjoyed it. Thanks so much for joining us on the podcast today.

Matthew:

Thank you so much. I really appreciate you having me.

Ian:

Awesome.

 

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