In the (still) rapidly evolving landscape of cryptocurrency and blockchain technology, combating digital crimes and illicit activities is an ongoing challenge. Crystal Blockchain, a leading, EU-based player in the field, has been at the forefront of this battle since its inception. Geopolitical turmoil—the result of the ongoing war—acts as an invitation for dubious cyber-activity. 

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We sat down with Marina Khaustova, the CEO of Crystal Blockchain, to gain insights into their efforts in preventing crypto-related crimes, staying updated with the ever-changing crypto world, and supporting law enforcement agencies. Marina sheds light on the extensive backlog of crypto-related fraud victims, their work in helping these individuals, and their preventive measures to deter future crimes. She also provides a glimpse of what to expect from Crystal Blockchain in the near future, stressing their commitment to user support. 

Crystal Blockchain recently partnered with the Global Anti-Scam Alliance to fight fraud in the Web3 ecosystem. Their collaboration has resulted in the Crypto Trust Seal (CTS), an initiative developed to establish a baseline level of transparency in a chronically opaque industry. With CTS, certified companies can provide a degree of assurance by adhering to stringent standards that undergo external verification. This marks a pivotal step in the industry, as these responsible practices are expected to evolve into essential requirements for all participants, ensuring a more secure and transparent digital asset landscape.

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Crouse: What is the most prevalent crypto-related crime you help prevent?

Khaustova: We have an inimitable database of entities covering the highest-risk geographic regions across Eastern Europe, Central Asia, and the Middle East, and our solution is used by customers and partners across the globe to address risk. In the ever-evolving landscape of crypto, one could describe our efforts as a relentless race against increasingly sophisticated bad actors. As this technology continues to advance in real-time, there are areas that remain unregulated or under-supervised, presenting opportunities for malicious players. They’re keen on exploiting these gaps swiftly because, as the industry matures, and our solution evolves, they won’t have the same opportunities to illicitly divert funds in the future.

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The nature of the crimes we encounter varies widely—from acts like human trafficking to emerging threats like the so-called “pig butchering” scams. The latter are often called romance scams too, whereby victims are seduced with flattery and promises of a close or romantic relationship. Once the fraudster has built the illusion of trust, the victim is defrauded progressively through various means. Often it is through loaning the fraudster large sums of money that are never paid back. Other times it is being convinced to invest in funds that later turn out to be fraudulent.  The term itself is grounded in the notion that victims are fattened up by flattery before falling for the fraud. Yet, irrespective of the nature of the initial crime, the end game for these culprits remains consistent: laundering their ill-gotten gains.

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‘Prevention,’ especially in the blockchain realm, is a complex challenge. Until recently, it was. Our solution, Crystal, empowers financial service providers with robust detection capabilities. We flag funds originating from dubious sources, with a specific emphasis on rapidly identifying money associated with thefts and frauds. The emphasis placed on speed is crucial. The quicker we can alert authorities about the stolen funds, the higher the likelihood of interception by a receiving party.

Internal investigation and research combined with AI have proven to be instrumental in enhancing our efficiency, enabling us to detect irregularities or patterns resembling scams or Ponzi schemes early on. This proactive approach doesn’t just help in detecting bad actors—it plays a pivotal role in stopping the transition of crypto funds into untraceable cash, effectively halting money laundering in its tracks.

How does Crystal Blockchain help in combating cryptocurrency-related crimes, such as ransomware and fraud?

Understanding a challenge is the first step to addressing it, especially in the realm of blockchain. Crystal stands as a beacon of clarity in the expansive world of digital assets. Our primary mission is to ensure that the digital asset space, designed with transparency at its core, remains resistant to criminal activity.

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To achieve this, we engage in thorough research, keeping tabs on potential risks and implementing anti-money laundering monitoring across hundreds of technological protocols. These protocols serve as the foundation for a multitude of digital currencies. Our expertise allows us to pinpoint suspicious activities and trace them back to specific wallets or transactions. By doing so, we equip our clients with the insights needed to evaluate the risks of engaging with new parties or to delve into ongoing money laundering investigations.

How does Crystal Blockchain stay updated with the rapidly evolving blockchain and cryptocurrency landscape?

Crystal Blockchain originated from a company that has deep roots in the blockchain industry, dating back to 2011. This means we’ve been involved since the early days, with a team that’s passionate about the positive potential of digital assets.

As the world of blockchain and cryptocurrency grows and changes, it’s crucial for us to stay ahead. To do this, we maintain a high standard for our team’s knowledge and expertise. We have a dedicated group of researchers who are always on the lookout for any signs of trouble in the tech world, be it security breaches, hacks, or scams. They comb through vast amounts of information from various sources, even having special access to data on high-risk activities and leaks.

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One point of pride for us is our track record. Over the years, we’ve been able to spot many money laundering trends in their infancy, well before they made headlines. This proactive approach ensures we’re always ready to combat threats in the rapidly evolving blockchain landscape.

How does Crystal Blockchain support law enforcement agencies and government bodies in their investigations?

As we approach the end of 2023, it’s evident that digital assets have taken center stage in the realm of banking and traditional finance. International regulatory groups, such as the FATF, are pushing forward with guidelines, urging local authorities to design systems that encourage the adoption of these digital assets while ensuring stringent oversight.

However, a significant challenge arises from a lack of both education in the digital asset domain and the tools to navigate its intricacies. This is where Crystal Blockchain steps in. We offer a comprehensive package: tools, consultation, and training tailored for governments and law enforcement agencies. We started by providing our services to the Ukrainian cyber police, and now we have expanded into US Sheriff’s offices and to the UK’s MET Police. Our aim is to empower them to effectively manage and address the risks tied to cryptocurrencies.

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While expertise and tools are gradually becoming more available in the market, they’re still predominantly in the hands of a select few experts. Crystal Blockchain’s primary contribution is offering an unfiltered and realistic perspective on the dynamics of the digital asset space, cutting through the often overwhelming noise and hype.

You mentioned that there is an extensive backlog of crypto-related fraud victims. What does that backlog look like and how are you working to help people struggling to have their case seen by law enforcement? 

Over the past few years alone, through outside interactions with law enforcement and our own reporting, there have been thousands of reports worldwide of fraud, pig butchering, romance scams, investment scams, etc. Unfortunately, local resources are incredibly overwhelmed and have no experience to pull from and engage the perpetrators placing the weight of the problem on national and international resources. We are talking about hundreds of thousands of victims who have been traced as entities in these criminal activities. 

According to the U.S. FBI Crime Report in 2022, the Internet Crime Complaint Center (IC3) averaged over 600,000 reports a year for the last five years of cybercrime. Crystal and law enforcement officials are working diligently to train and arm these officers and agents, supporting personnel with the tools to combat this insanely large backlog and fight against cybercrime.

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What preventative measures are you taking to head off more people falling into that backlog?

Education and awareness are key foundations to attacking further crypto fraud and fraud-related activities. Whether it is educating the public, or private sectors to identify indicators of this activity through our own tracing and intelligence initiatives, or educating the masses on how these criminals are conducting their business so the next victim is not a victim. 

Ultimately, deterrence is the remedy, but to get there, we need strong law enforcement support, strict penalties for these criminal acts, and attacking all the outer issues contributing to these organized crime elements, for example, human trafficking. Interpol has called them Online Scam Centres, which are staffed by human trafficking victims to conduct fraud and scam activities. Just over the past several months, law enforcement has secured and rescued thousands of these victims, that were conducting nefarious activity for these organizations.

What developments or new features can we expect from Crystal Blockchain in the coming year or two?

Firstly, we plan to continue increasing the number of supported blockchains and strengthen our capabilities for cross-chain investigations and automation of this process, including via the integration of AI.

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Secondly, the speed of notifying our users about any risky activity also remains a priority. Therefore, integrating additional heuristics for pattern recognition, adding new risk indicators and data sources, plus other functionality for the fastest possible alerts is also included in our plans. In addition to everything described above, we are in constant contact with our users and strive to help them with any challenges they face. In this regard, we continue to work on simplifying the processing of alerts from the system, expanding the capabilities of case management, and generally improving their user experience.