Is Cryptocurrency Anonymous

A Guide to How Crypto Criminals are Caught

According to Chainalysis, governments around the globe have seized billions in cryptocurrency since Bitcoin was formed. Private asset recovery firms have been returning assets worth billions to victims of fraud. The question remains: how do they operate under the hood and find criminals if cryptocurrency is truly anonymous?

The entirety of the process depends on the party that discovers the suspicious activity;

  1. The cryptocurrency platform.
  2. Private sector investigators.
  3. Public sector investigators.

1)The cryptocurrency platform

Cryptocurrency platforms use special cryptocurrency compliance tools to monitor transactions on the platform. These tools are important because cryptocurrency platforms do not have control over incoming money and transacted funds, the blockchain handles the transactions. However, they can stop the money from being turned into any other currency. 

Chainalysis, a cryptocurrency platform that tracks and analyzes transactions, says that crypto platforms should be open about their Know Your Customer and Anti-Money Laundering procedures. If a crypto platform can prove that it screens for suspicious activities and responds appropriately, it will help uphold its image.

Learn more abouy KYC and AML in crypto

2)Private sector investigators

Companies that have been victims of cryptocurrency theft can enlist the aid of private investigators, lawyers, and other professionals who specialize in retrieving lost assets. Grant Thornton’s Cryptopia case is one example. 

The process involves collecting and analyzing data from the blockchain, as well as requesting information from third parties. Civil courts have also begun to deal with cases involving cryptocurrencies, using traditional asset preservation techniques as well as new approaches specialized to deal with decentralized blockchains.

The identification and securing of assets can be a piece of cake. However, the recovery of crypto assets is only possible if the defendant does not want to abandon their anonymity. Many people opt for this option because they do not want to get involved in court cases against them. However, some cases reach the enforcement and recovery stage.

3)Public sector investigators

When law enforcement officers suspect that a person is using cryptocurrency for criminal purposes, they gather relevant details of the individual’s financial transactions and examine their digital footprints. 

 Law enforcement may use blockchain analysis tools to determine whether an unlawful activity has been committed, including whether any funds have been deposited at any identified exchanges and how they are being spent and moved.

Investigators subpoena/request information from the identified cryptocurrency business, with whom the suspect has transacted and may have an account.


Following sufficient case evidence for the suspect’s indictment and arrest, it is common for investigators to coordinate with the business where the suspect’s cryptocurrencies are held. In some cases, the suspect turns over their assets to receive reduced prison time. If they are acquitted, they regain the assets; if convicted, they lose their assets as part of their sentencing. In ancillary proceedings, it is determined whether third parties have claims on the seized assets.

Cryptocurrency anonymity

All records are public but difficult to read

Transactions worth more than $1 billion have already taken place, and anyone can view any of them on a block explorer. However, this information requires some time and technical skills to understand. Many users use pseudo names which require a lot of tracking to discover the real-world owner of the wallet.


Crypto criminals may want to wear multiple hats, switch up their aliases, and use a VPN – but it’s next to impossible to completely stay under the radar. The cryptocurrency community is unbelievably unique with big potential for growth, but it’s also filled with obstacles. These obstacles are what make cryptocurrencies so special, but they have also attracted a special kind of individuals. For better or worse, these individuals are beginning to reveal their identities of themselves because they believe in the movement so much that they’re willing to risk their reputation and their freedom.

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