Intro
In this episode of the “Planet Money” podcast, titled “How to launder $600 million on the internet,” the hosts explore the world of crypto heists and money laundering. They follow the story of Aaron Plant, a private detective specializing in stolen cryptocurrency, as she investigates the largest crypto heist in history and tracks down the stolen funds. The episode sheds light on the methods used by hackers and the efforts made by law enforcement to combat money laundering in the digital age.
Main Takeaways
The World of Crypto Heists
- Axi Infinity was a popular game in the world of crypto where you could buy digital pet blobs, some of which were selling for thousands of dollars.
- In March 2022, Axi Infinity was the scene of the largest crypto heist in history, with $600 million worth of crypto stolen from the company’s digital wallets.
- Aaron Plant, a private detective specializing in stolen cryptocurrency, was tasked with tracking down where the stolen crypto went.
- The investigation lasted 18 months and involved facing off against some of the world’s most sophisticated digital money launderers.
- Aaron and her team often get called in for high-profile crypto crimes and she has a security clearance for her work with law enforcement.
The Evolution of Money Laundering
- Aaron started out investigating bribery and corruption for governments, and loved the methodical nature of the work.
- In the early 2000s, digital evidence was just emerging and Aaron would physically sneak into server rooms to copy incriminating data.
- Aaron and her team would often go undercover as IT personnel to copy emails and trace payments through the financial system.
- Criminals are now using cryptocurrency to launder money, but every transaction is recorded on the blockchain and can be traced in real time.
- While crypto investigations can move faster, criminals can also move faster and in more sophisticated ways.
The Movements of Stolen Crypto
- Aaron has a tool that shows what happened after the Axie Heist, including the movement of stolen crypto.
- The hackers were already moving the stolen crypto in the first few hours after the heist, changing wallets and splitting money into different wallets.
- The hackers are methodical and break the money into regular amounts, moving it around in systematic ways.
- The stolen money hits a notorious cryptocurrency mixer called Torneito Cache, which is essentially a money laundering tool.
- Mixers can be used for legitimate reasons, but they are also used for illegal activities, making it difficult to track the movement of money.
The Role of North Korea
- The MO of the hackers suggests the involvement of North Korea, making the heist more than just about getting the money back.
- North Korea has been frozen out of the US financial system since the 1950s.
- North Korea has turned to crypto in recent years to bypass financial sanctions.
- North Korea’s state-sponsored hackers are among the world’s most sophisticated digital money launderers.
- Stolen crypto funds are being used to fund North Korea’s weapons production and delivery systems.
Government Response and Investigations
- The Axi Infinity hack was a turning point, leading to the US government putting sanctions on crypto-mixers and going after North Korea’s favorite mixers, including Tornado Cash.
- The larger goal is to stop North Korea from turning stolen crypto into actual cash, which is needed to buy stuff like ballistic missiles.
- The FBI and investigators from Chanalysis are working together to follow the money up and down the blockchain and exploit the vulnerability of centralized exchanges, where stolen money can be frozen.
- The window of time to freeze money is only 20 minutes to one hour, so investigators are constantly monitoring and waiting for alerts to go off.
- North Korean money worth almost $6 million was frozen in a crypto heist investigation.
Summary
The World of Crypto Heists
Axi Infinity, a popular crypto game, became the target of the largest crypto heist in history, resulting in the theft of $600 million worth of crypto. Aaron Plant, a private detective specializing in stolen cryptocurrency, embarked on an 18-month investigation to track down the stolen funds, facing off against sophisticated digital money launderers in the process.
The Evolution of Money Laundering
Aaron’s background in investigating bribery and corruption prepared her for the world of crypto crime. She witnessed the transition from physical evidence to digital evidence and adapted her investigative techniques accordingly. While cryptocurrency transactions are recorded on the blockchain and can be traced, criminals have also become more sophisticated in their methods.
The Movements of Stolen Crypto
Using specialized tools, Aaron traced the movements of the stolen crypto after the Axie Heist. The hackers swiftly moved the funds, changing wallets and splitting the money into different accounts. They utilized a notorious cryptocurrency mixer called Torneito Cache to obfuscate the money’s origin and make it difficult to track.
The Role of North Korea
The tactics employed by the hackers suggested the involvement of North Korea, which has turned to cryptocurrency to bypass financial sanctions. The stolen crypto funds are being used to finance North Korea’s weapons production and delivery systems. This revelation prompted the US government to impose sanctions on crypto-mixers and intensify efforts to prevent North Korea from converting stolen crypto into cash.
Government Response and Investigations
The FBI and investigators from Chanalysis are collaborating to follow the money up and down the blockchain. They aim to exploit vulnerabilities in centralized exchanges where stolen money can be frozen. The window of time to freeze funds is limited, requiring constant monitoring and swift action. Despite these efforts, only a fraction of the stolen money is expected to be recovered due to the nature of digital currencies.
Conclusion
The Axi Infinity Heist served as a wake-up call for the US government, leading to unprecedented measures to combat crypto money laundering. Investigator Aaron’s work shed light on the complex world of stolen crypto and the involvement of state-sponsored hackers. Her update at the Axicon conference was met with excitement and celebration, highlighting the importance of ongoing efforts to tackle this evolving form of financial crime.
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