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    How to launder $600 million on the internet

    enSeptember 16, 2023

    Podcast Summary

    • Largest crypto heist in history in Axie InfinityAxie Infinity, a game with NFTs, grew into a multi-billion dollar business but faced a $600 million crypto heist, involving sophisticated money launderers and government intervention.

      The world of cryptocurrency and non-fungible tokens (NFTs) can offer unique economic opportunities, but also comes with significant risks, as evidenced by the largest crypto heist in history in Axie Infinity. Axie Infinity, a game with digital pets as NFTs, grew into a multi-billion dollar business, but was hit by a shocking heist resulting in the theft of $600 million worth of crypto. This case launched an 18-month-long investigation and involved sophisticated digital money launderers, pulling in the FBI and raising alarms at the highest levels of government. It's a reminder of the potential rewards and risks in the rapidly evolving world of digital currencies. Additionally, the discussion highlighted the importance of staying informed and making the most of our time spent on media, as emphasized by NPR's Pop Culture Happy Hour podcast. The podcast offers insights on the latest shows, books, music, and movies to ensure that time is well spent. Lastly, the episode of Shortwave featured on NPR showcased the stories of women scientists, expanding our horizons and challenging the notion that only famous men like Einstein, Newton, and Schrodinger make significant scientific contributions.

    • From physical sneaking to following the blockchainInvestigating financial crimes in the digital age involves adapting to new technologies and following the money trail in real-time, even as criminals use sophisticated methods to stay ahead.

      The world of investigations, especially in the realm of cryptocurrency, has evolved significantly over the years. While traditional methods of investigating financial crimes involved physical sneaking and undercover work, the rise of cryptocurrency has made the process more transparent and faster, yet more complex. Erin, a vice president of investigations at Chainalysis, shares her experiences of investigating bribery and corruption cases in the early 2000s and how the landscape changed with the advent of digital evidence and later, cryptocurrency. The use of cryptocurrency for illicit activities has made it essential for investigators to adapt and follow the money trail in real-time, but criminals also move faster and use sophisticated methods. The traditional methodical work of investigating financial crimes now involves following the blockchain, a visible and available record of every transaction, but it also requires advanced knowledge and tools to keep up with the criminals. The use of technology has transformed the investigative process, making it both more challenging and more exciting. Listen to the 1A podcast from WAMU and NPR to learn more about Erin's experiences and the world of cryptocurrency investigations.

    • Tracking Stolen Cryptocurrencies through MixersInvestigating cryptocurrency theft is challenging due to sophisticated techniques like using mixers to cover tracks. Mixers scramble cryptocurrencies together, making it impossible to trace the original source, and can be used for both legitimate and illegal activities.

      Cryptocurrency theft is a complex and intricate process that involves quick movements and sophisticated techniques to cover tracks. During the Axie Heist investigation, Erin was able to trace the stolen funds using blockchain technology. The hackers were seen moving the money through multiple wallets and mixers, making it difficult to track. Tornado Cash, a notorious cryptocurrency mixer, was identified as one of the destinations for the stolen funds. Mixers are digital services that scramble cryptocurrencies together, making it impossible to trace the original source. While mixers can be used for legitimate reasons, they are also the ultimate money laundering tool. The investigation revealed that the hackers were methodical and systematic in their movements, making it clear that they were experienced and skilled in cryptocurrency theft. The use of mixers made it nearly impossible to trace the stolen funds back to the original thieves, highlighting the challenges in investigating and recovering stolen cryptocurrencies.

    • Tracking cryptocurrency heist funds through mixersAdvanced technology can demix cryptocurrency funds passed through multiple mixers to trace ill-gotten gains, but not all funds can be recovered due to sophisticated hacking tactics and notorious mixers.

      Hackers involved in large-scale cryptocurrency heists, such as the Axie Infinity Heist, often use multiple mixers to obscure the origin of the stolen funds. This makes it challenging for investigators to trace the ill-gotten gains. However, advanced technology, like Chainalysis' demixing, is being developed to reverse the mixing process and follow the money through the mixers. While this technology is effective, not all the money can be recovered as some still manages to slip through the cracks. The sophistication of the tactics used in the heist, such as precise timing and the use of notorious mixers like Tornado Cash, indicates that the hackers were part of a well-organized and experienced crypto hacking operation. Approximately 10% of the stolen $600 million was lost to the mixing process.

    • North Korea's cryptocurrency hacking and the FBI's challengesThe FBI's Virtual Assets Unit is actively investigating North Korea's involvement in cryptocurrency hacking cases, but the decentralized nature of cryptocurrency poses unique challenges. North Korea's history of being sanctioned highlights the importance of stopping the flow of illegal funds to this country.

      The involvement of North Korea in cryptocurrency hacking cases can escalate financial crimes from a mere financial loss to a matter of national security. The FBI, through its Virtual Assets Unit, is actively working on such cases, but the clash between the FBI's traditional methods and the decentralized nature of cryptocurrency presents unique challenges. The FBI's Chris Wong, a cryptocurrency expert, shared insights on North Korea's long-standing history of being sanctioned and the importance of stopping the flow of illegal funds to this country. Despite his willingness to discuss North Korea's involvement, Chris remained tight-lipped about the Axie Infinity case. The Indicator, Code Switch, and Pop Culture Happy Hour podcasts from NPR offer insights on various topics, from economic indicators to race and identity and pop culture, respectively.

    • North Korea's use of cryptocurrencies to fund nuclear programNorth Korea uses crypto for anonymity and bypasses financial restrictions, US targets crypto mixers and exchanges to prevent cashing out, half of nuclear program funded by stolen crypto, goal is to stop cashing out entirely.

      North Korea has been using cryptocurrencies as a means to bypass traditional financial system restrictions and fund their nuclear weapons program. The anonymity and lack of regulation in the crypto world have made it an attractive option for North Korean hackers to steal and launder large amounts of funds. The US government has taken notice and has started targeting crypto mixers and centralized exchanges to prevent the North Koreans from converting their stolen crypto into fiat currency. Last year, North Korea broke records with both their crypto hacks and nuclear program activities. The Biden administration estimates that half of North Korea's nuclear program is funded by stolen crypto. The US government's goal is not just to slow down these activities but to stop the North Koreans from cashing out their crypto entirely.

    • FBI's Strategy to Freeze Stolen Crypto FundsThe FBI collaborates with exchanges and blockchain analysis firms to monitor and freeze stolen crypto transactions, recovering significant funds through constant vigilance and quick action

      While some crypto exchanges operate with a disregard for traditional financial regulations, others cooperate with law enforcement agencies like the FBI to freeze stolen crypto funds. The FBI, with the help of blockchain analysis firms like Chainalysis, uses a strategy of monitoring centralized exchanges for stolen crypto transactions and freezes the accounts before the funds can be laundered or disappears. This process requires constant vigilance and quick action, often involving 24/7 monitoring and collaboration with exchanges and law enforcement agencies. The success of these efforts can lead to significant recoveries of stolen funds, as seen in the case of North Korean crypto heists.

    • Axie Infinity Heist: Tracing and Recovering Stolen Crypto FundsThe Axie Infinity Heist highlighted the challenges of tracing and recovering crypto funds in the digital ecosystem, resulting in increased efforts to combat money laundering and the recovery of some stolen funds.

      The Axie Infinity Heist was a significant event in the crypto world, leading to increased efforts to combat crypto money laundering by the US government and crypto industry. The investigation, led by Erin, resulted in the freezing and recovery of some of the stolen funds, but the majority remains missing. The heist also brought attention to the challenges of tracing and recovering crypto funds in the digital ecosystem. Despite the challenges, Erin felt a sense of accomplishment and was allowed to share the details of the case publicly, which was a rare occurrence due to the confidential nature of her work. The Axie Infinity team appreciated her efforts and invited her to speak at their conference, providing her with a unique and emotional experience.

    • Exploring Axie Infinity: Community and Connection in the Digital WorldDiscover the importance of community and connection in the Axie Infinity game, even as the world of cryptocurrency extends beyond digital transactions.

      The world of cryptocurrency and blockchain technology extends beyond digital transactions and online interactions. During an exploration of the Axie Infinity game, the hosts of Planet Money discovered the importance of community and connection, even in the digital realm. They attended a meetup and shared experiences, taking photos with the Axie hand signal, a symbol of camaraderie among players. However, the hosts admitted their lack of proficiency in this gesture, adding a touch of humor to the experience. The episode also highlighted the potential risks involved in the crypto world, with a reminder for listeners to secure their investments. Beyond the financial aspects, the hosts also shared an upcoming episode on Bullseeye featuring Peter Dinklage, where they will discuss his new movie and his unexpected hobby of interacting with crows. Here and Now, NPR's daily news podcast, offers listeners a steady and calmer lens on the news, providing in-depth analysis and context.

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