Special Report

Crypto & Crime on the Blockchain

December 15, 2017 by Mikel Rastegar in Special Report   Leave a Comment
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Crime Rises as Crypto Rises

As cryptocurrencies grow in popularity, so will the number of crimes that revolve around the technology. Just like the advent of the internet gave birth to ‘cybercrime’, the advent of cryptocurrencies will give rise to ‘cryptocrime’.

There have already been countless felonies charged in cases revolving around the cryptospace.

New technology will always attract the types of people interested in exploiting security vulnerabilities, as well as committing other white collar crimes such as securities fraud for capital gain. When new technologies arrive, the judicial system doesn’t always have the proper laws in place to handle the violations.

Due to the cryptic nature of blockchains, it’s the new “wild west”.


Exchange Hacking

When you invest in a crypto company, you need to use an exchange. Each one of these exchanges are subject to the same security vulnerabilities of any other site on the web. A weak point in the code, or weak passwords could result in a security breach. Furthermore, the overwhelming majority of the exchanges offer no insurance (with the exception being Coinbase on portions of their site).

How to protect yourself:

The most common method is to enable 2-step verification on the exchange login. This requires the use of two devices (usually the second being your smartphone) to login to the exchange. Be sure to research the exchange that you choose to deposit to. Each exchange has it’s own pros and cons.

It’s also important to diversify your investments. Don’t keep all your eggs in one basket, or you stand the chance of losing it all.

Wallet Theft or Loss

Some people that own a large amount of cryptocurrencies will diversify their storage into several places, rather than having it stored on the exchanges. One of these places is a physical hard drive called a cryptocurrency “wallet“. For cold storage, wallets are kept in a safe place in your house or in a safety deposit.

Others keep their wallets on their person and actually use it as a method of payment. Obviously theft or loss is a concern with anything you keep in your pocket all the time.

How to protect yourself:

Keep your wallet in a safe place and don’t let anyone know about it. Always use a truly random key and always back up your wallet!

“Get Rich Quick” Ponzi Schemes

As the cryptospace explodes and the market cap for all cryptocurrencies reaches trillions of dollars, more and more online scammers are trying to take advantage of people’s eagerness to get rich fast investing in Bitcoin or other cryptocurrencies. Some of these traders will essentially make outlandish “too good to be true” claims, and they are simply that.

How to protect yourself:

Due diligence. Do your research on investment companies yourself. Find a good investment firm that doesn’t make guarantees. Or, just do the trading yourself. The truth is, like any other market, there are no real guarantees.

Fraud / Phishing Scams

As with Banking, Payment Services, or E-Commerce sites, there will be an avalanche of crypto-based phishing scams at every turn. Malware, websites and emails will attempt to dupe you into giving away your login, and personal information. Since cryptocurrencies are decentralized, you are ultimately responsible for your own security even more so than centralized institutions.

How to protect yourself:

Pay attention and educate yourself on what to look for with fake websites, emails, malware and apps from the app stores. Think not only twice but three times before typing your information into a form online!

Bogus Forks or “Coins”

It’s ridiculously easy to create an “Alt coin”. You can do it in just a few minutes in fact with code copied from the internet. There’s already thousands of very pointless “Alt coins” created in the wake of bitcoin. Some of these make it to market where investors can throw their money into that coin’s blockchain. What are those companies doing with the funds? Are they actually building something cool? Or are they simply taking the money and running?

How to protect yourself:

Know who you are giving your money to. Make sure they have a strong “white paper”, a solid roadmap, overall business idea, brand, partners, developers, a working model/application, and good leadership.

Types of Crimes involved with Cryptocurrency

Although California has yet to mention cryptocurrency specifically in their laws, there are a number of possible criminal offenses that can be charged associated with all aspects of the cryptospace, from exchanging to mining.

Possible criminal charges include:

Money Laundering:

Federal Money Laundering


Extortion; aka Blackmail

Internet Fraud:

Federal Cybercrime

Illegal Drug Trade:

Drug Possession for Sale

Ponzi Schemes:

Ponzi Scheme


Burglary Laws



Grand Theft:

Grand Theft



Computer Hacking:

Cybercrime in California: It’s Complicated

Unauthorized Trading:

Unauthorized trades are transactions that a broker makes for a client without the customer’s authorization. The Securities and Exchange Commission (SEC) regulates all market trading on the federal level. If a cryptocurrency broker or trader is caught making unauthorized trades he will be facing fines and charges from the SEC.

Looking Forward

Cryptocurrencies and blockchain-based applications have only just begun. It’s the decentralized nature of this business architecture that is giving it all the buzz. In essence this new technology is the new “dot-com” boom. Nothing has been more disruptive in the online world since applications in the mobile space.

As serious money is moved into the crypto-market, there will be those interested in taking large amounts of it in any way possible. The irony is that the blockchain concept is at it’s core meant to be more secure and free to use than the traditional centralized concept of doing business. But, whether or not decentralization is actually a better system remains to be seen.

There is one thing for sure, the technology of the blockchain is revolutionary and exciting, and may also pave the way for a more automated, and democratic society.

We’re Here to Help

Are you facing criminal charges based on a crypto crime? Did the police confiscate your property or assets? We cannot stress enough the importance of consulting and retaining a proper cybercrime lawyer to fight your case ASAP. We’re here to help.

Need a Criminal Defense Attorney? CALL NOW: 310-274-6529

Seppi Esfandi is an Expert Criminal Defense Attorney who has over 17 years of practice defending a variety of criminal cases.

Read our Client Reviews

[1] https://www.cryptocoinsnews.com/bitcoin-crime/

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