One of the world’s leading cybercrime investigators is urging governments to fast-track regulation of cryptocurrencies following a string of kidnappings where gangs have demanded ransoms in Bitcoin or crime-riddled ‘privacy coins’.
Prominent cryptocurrency intelligence agent David Carlisle says kidnap gangs are specifically targeting countries with little or no jurisdiction over Bitcoin and the hundreds of smaller ‘altcoins’.
In a Coin Rivet article for the Daily Express, Mr Carlisle explained how cryptocurrency was making certain types of crime easy for the criminals.
Only recently, two high-profile kidnappings saw gangs attempt to extort more than £8m from the families of high-profile victims.
In Costa Rica, the owner of the 5dimes gambling site – William Sean Creighton Kopko – was abducted at the end of last year before a gang demanded almost a million dollars’ worth of Bitcoin.
Kopko’s family eventually paid the ransom, but Kopko himself is still missing despite 12 people being arrested for their alleged involvement in the kidnap.
Demands in Monero
Meanwhile, in Norway, the wife of billionaire Tom Hagen is currently still in the hands of kidnappers demanding €9m in privacy coin Monero.
Anne-Elisabeth Falkevik Hagen was abducted from the family home on the outskirts of Oslo on October 31st. Norwegian police had kept the incident under wraps until just a few days ago in the hope that fresh evidence would come to light.
However, the police commander leading the investigation decided to go public, revealing that he had urged the family not to pay up.
“There have been both ransom demands and serious threats,” said inspector Tommy Broske.
“Police have so far advised the family not to meet the requirements.”
Both kidnappings have led David Carlisle – a former US Treasury advisor on terrorist financing, financial crime, and crypto-related activity – to lobby governments throughout the world to rapidly usher in regulation.
“Cryptocurrency enables certain types of crime effectively – and others less so,” he said.
“One of the things about extortion with cryptocurrency that is convenient for kidnappers is that all they have to do is set up a digital wallet.
“We need to create an environment of hostility towards the criminal elements.”
While many countries are embracing regulation of cryptocurrency and drafting up policies that will facilitate more authoritative control over wallets, exchanges, and even taxation, there are many nations actively ignoring such issues.
This, says Mr Carlisle – currently Head of Community at cryptocurrency intelligence agency Elliptic – is leaving the door wide open to crime.
“I think one of the most significant issues we observe is that criminals look to exploit those parts of the world that don’t regulate cryptocurrency,” he explained.
“We see criminals use services in jurisdictions where they can operate without any observation.
“There’s a tangible benefit to regulation if it can promote transparency and create a level playing field that everyone can operate safely from.”
Pay the ransom
In contrast to the advice of the Norwegian police, however, Mr Carlisle does suggest that the way to snare the kidnappers of Anne-Elisabeth Falkevik Hagen would be to allow the ransom transaction to go through. He says the gang’s demand for controversial privacy coin Monero could be the key to their undoing.
“One of the issues we encounter is that criminals need to exchange their Monero for Bitcoin before changing it back into fiat (standard currency),” he added.
“The point where they convert Monero into Bitcoin is where we start to see the paper trail for our investigations – that’s how we can track down the bad guys.”
There is though, Mr Carlisle suggests, little need to lose faith in the progress of cryptocurrency and the benefits it can bring.
“There’s a perception – even among governments around the world – that crypto is largely criminal,” he added.
“But there are a lot of ways in which the picture is changing.
“Whatever their ultimate future, cryptocurrencies are here to stay in some fashion.
“We’re trying to shed light on the criminal element but also promote good practice within the industry. There are a lot of players in the industry who want to do things by the book, but there are bad actors.”
Monero came in for particular criticism from Elliptic, although Mr Carlisle did say it was unusual to see the contentious privacy coin being used in a ransom demand.
“It’s actually been the case generally that we’ve not seen Monero used in many of these kidnapping cases because it can actually be quite a difficult currency to get hold of,” he said.
“But we are hearing from regulators across the world about what these privacy coins mean to them.
“Places like Japan, for instance, are talking about actually banning privacy coins altogether purely because of the way they offer too many solutions to criminals.”
However, he does have faith in the prospect that the crypto community can clean its act up, and believes things are moving in the right direction.
“Where it occurs, it’s inevitable that people will associate cryptocurrency with crime,” he added.
“There is though, a lot of evidence to show that criminal activity is shrinking in the cryptocurrency space.
“It’s a tremendous challenge for regulators and law enforcement agencies because the technology and processes are changing all the time but, with the perspective of a potential global regulation framework, this space will become more acceptable and accessible.”