SECURI Ci iminal Exploitation of Digital Currencies Homeland g Security 2-3 Investigations Law Enforcement Sensitive Homeland Security Investigations HSI Established in 2003 with the creation of the U S Department of Homeland Security DHS One of the three components of the U S Immigration and Customs Enforcement ICE The largest criminal investigative agency within the Department of Homeland Security DHS Combine legacy agencies' statutory authorities Over 126 domestic field offices and 72 international offices Law Enforcement Sensitive Homeland Security Investigations I-ISI Criminal EX loitation 0f Di ital Currencies ruling Homeland 5 Security a wtet Investigations Law Enforcement Sensitive What is a Virtual Currency o An alternative financial value system involving the exchange of funds to purchase precious metals or other value base which can later be used in exchange for products and services o Is not registered anywhere and it is not governed by any law other than arbitration private forums o Personal data is not required o The system focuses strictly on activities of the forum o Information stored for two months and then permanently deleted Law Enforcement Sensitive Types of Virtual Currencies E-Currency E-Wallets Digital Gold Virtual World Virtual Games Merchants FB Amazon Crypto-Currencies Law Enforcement Sensitive Homeland Security Investigations HSI Homeland bin Security ACCEPTED HERE aking Investlgatlons Law Enf ent Sensitive o Created in 2008 by Satoshi Nakamoto o A purely peer-to-peer version of electronic cash would allow payments to be sent directly from one party to another without going through a financial institution o Digitally created units of currency o Sent from one address to another in the same way you might send cash from your bank account to a friend but no name would be needed as part of the address Law Enforcement Sensitive o Instead human-readable strings of numbers and letters thirty-three characters length always beginning with the digit one or three Therefore 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W Might send 1 30000001 BTC to 132tQpb K1B5NmH8Vx2rewF9AOrcKv215H o The transaction is instantaneous and does not travel through a third party such as a bank o The owners of the addresses will need to keep in an account known as a wallet computer or phone Law Enforcement Sensitive How To Acquire Bitcoins Locate and download to your computer tablet or phone a bitcoin wallet Create your wallet account anonymity Used to store and transfer your crypto-currency Law Enforcement Sensitive How To Acquire Bitcoins Purchase a bitcoin from an exchanger A web-based platform for users to sell and buy crypto-currencies Domestic MSB's and BSA and Foreign Offer anonymity Send Currency to an Exchanger o Bank account o PayPal o Western Union o Cash o Money transmitter Add bitcoin to wallet Law Enforcement Sensitive Homeland Security Investigations I-ISI LocolBitooins Buy bitcoins Sellnitooins Postatrade Forumsa Inroir Sign up free I Log in Buy bitcoins with cash in US Dollar USD LooalBitooins oom user jdeir wishes to sell bitcoins to you Price 107 62 USD I BTC User I idea r eeo baelt score 163 see feedbaon Trade limits BUD 5000 USD Location Ba timore MD 21230 USA look up otrer cities in United States How much you wish to buy 300 Send trade request Please I log in or 8 sign up to begin trading instantly Signing up is free and takes only 30 seconds Homeland Securityr Investigations Terms of trade with jdeir Contact hours Ham 6pm Mon aturday Meeting preferences Starbucks chipotle or something in or around i- ee eral Hill hen-1 2 Rico Closures ma m mCmm 11 - MM - Quartz a 'Riqg - 14 It UnisI'llno illit tzll' II I'll Law Enforcement Sensitive i - Li I l'l i it 't t i The price of a bitcoin is determined by supply and demand When demand for bitcoins increases the price increases and when demand falls the price falls Law Enforcement Sensitive 9 Send Bitcains Lypucuuiteuurnanm BTCD 0005 Homeland Security Investigations Homeland Security Investigations HSI How To Acquire Bitcoins Requested amount optional I 56 Addresstorequestto 'lKGe rdwNETthQEx wr HmNger include label with address Have this CIR-code scanned by the sender - $109 16 Law Enforcement Sensitive Homeland Security Investigations HSI o Block Chain - Shared public transaction log on which the entire BTC network relies http blockchain info o All confirmed transactions are included in the BC-Ensures verification and enforced with cryptography o Every 10 minutes a new block is created and 25 BTC are released By 2017 it will be reduced to 12 5 BTC a halved every four years until the limit of 21 million BTC is reached Law Enforcement Sensitive Homeland Security Investigations HSI When to File a SAR Suspieinus Activity Rape-rt 2 1 arm 2011 revel-3m entices ml' rut EIE at 9 11 35 3 1 ET Eepharrtle all ELI 11 hl'i l'f i I DMPLE HE T1 RE RE HT sea- mmrummusi 1 - mlu tile-3w If En'r li1lr'n a in n mil-1 CITE- THE r LELl r Farmers nn Hepm #3 Ham 3 Nam-3 3' ruin a Hepuning Financlal lnst utlnn lnfurmatlnn Hr fps-ax Hnmelami Security l rluul' Investigations Law Enforcement Sensitive Homeland Security Investigations I-ISI From Cash to Bitcoins SAR Filed SAR Filed SAR Filed 4 a154 a s i a User LLS Bank Money LLS Bank U 5 Foreign Exchan er Virtual US-er Transmitter Money Correspondent Correspondent 9 Currency I Transmitter Bank Bank I I From Bitcoins to Cash EAR Filed Ah Virtual Foreign u s u s Bank User Currency EXChanger Correspondent Correspondent Bank Bank R glaze Lee g Homeland g Security 3 3 Investlgauons or 1 5111 Law Enforcement Sensitive Homeland Security Investigations I-ISI How Criminals Use and Exploit Bitcoins r Ihetant Payment Anywhere Any time Homeland 1 Security an Investigations Law Enforcement Sensitive Criminal Exploitation of Crypto-Currencies Virtual Currency Systems Exchange Makers Carding Forums Drug Forums Firearms Forums Law Enforcement Sensitive Child Pornography Forums Us 0 Homeland Security Investigations I-ISI HOW I Get into the Black Market STEP STEP GUIDE TID- GETTIHG STARTED DH HARRIET RELOADED Head te - - -- - -- - - leleelqel air infe- wallet and elicit ereate wallet THE BLACK 2- Time te eurehaee eerne leiteeine- Eliteeine are the currency ueed en ee head te - - -- - -- - - rntgea eern and Sign up fer a free feu leaelc later te buy the leiteeine enee yeu ltnew hew rnany' yeu need can 3- After getten a feel fer what the leiteeine will yeti its new time te access The Bill Ftead- Te de this yeu will need the ter lereweer- The ter lereweer ereu'idee added security te lereweing and gives te weleeitee using the _enien exteneien 1er can get ter frem here - - -- - -- - - terereieet erg 4- ter installed and the ter lereweer ninning new this linlc inte the address lear Clinic en create user and there yeu ge te The Black Market Fteleaded 1 Homeland Security Investigations Law Enforcement Sensitive Tor o Tor stands for The Onion Router o Tor is free open source software o Originally designed by the U S Naval Research Laboratory for the protecting government communications o Download from www torproject org o Prevents anyone from learning location or browsing habits o Tor is for web browsers instant messaging remote logins o Tor works by bouncing your communications around a distributed network of relays run by volunteers Law Enforcement Sensitive Homeland Security Investigations HSI Carding Forums IJII I llfc I HernamherM-EI P New Posts Fm Calenchaw 1' Fomm c uns 1 Gulch Lilli- 3 1' Farurn If 'aisisymr'listvisit hemmdieckm leF bycid lg the pleased Tami-mag manages sdectthefutmthatyuummvt t daeve mgliterhefmeynucmpust cickihemgisln' - um iesalec unbeluw PAlthu-gs Welcome to the PARbugs PakBugs Black Market Darkrnarketlv Buyand Sell Mays ExploitsJ Server Acne- 55 J Cant amunts Jdumps J Fullz J partial etc Here PakBugs D l' clal Ere-alt Card Shep alarm and full here eaeh Crediteardfer padal ffer FerBdays Ful ll-a Dl'l'lee- Sene Bank's Gnline banking PakBugs Arlrluuneerrlerlts Read About Latest At Paw by Kploiter M41013 if A Homeland a a Security Investigations Law Enforcement Sensitive Homeland Security Investigations I-ISI Drug Forums 1 Search Go COMICIIDI messageso orders accounts2 2os 26 i to ogou Er-z' L Category Silk Road forums Drugs Cannabis I II DISSOC latlves w ho 5 your tavorlle weiwrrajum iloaelaowreglaer Sunk Ecstasy Acknowledging Heroes Wj Lie Oplolds Other Precursors Prescription Androllt 100 HIGH GRADE WEED HIGH GRADE WEED Suoomne Strips Seo'n Loon more I- - tabs 50mg 1006 1 Stimulants 5130 $33 90 sroa 10 v22 00 Appare - Art Blotlc materials 4 BOOKS '3 v ill le Collectibles s tillu Me so Ior'lisun I slsmoo Winona Computer eqmpment Custom Orders Digital goods I lmltil omit-Md 6520mm Hummer I 16 High Ouallty 30mg Ohytodone 15 36 87% Purity Dafaphema'm - Gemlanu- TOP PRODUCT I 154 I Electronics 5105 95 $251 28 $415 on 525 31 nonullonsmsuurl qul tensk etl l3 Twit 51 37 Fireworks 'l 5 Full 1135mm 2 -l - I 33161an than Forgenes ml if Hardware tit SEX - iarnrezuctlor estproztltentt 3i26Tnpn Herbs Supplements I I Home ii Garden i mm cremains-om Lab Supplies - 2x Subutei 8mg 1 LSD Biotler 25g Black Tar Herein High Honeycomb 95% I u Mt Lo enes games bU rEHOiDhtne tablets QUBIIW Free Shipping PURE THC- 16 Blue 135mler Mammal 585 85 $12 to $40 81 $125 53 tiliinuo fad M1 Money a #183le Musical instruments If sir-Imam 15417 Packaging Tickets Weight loss Writing r communllv iorurns support Security Investigations Law Enforcement Sensitive Homeland Security Investigations I-ISI IT IS THE BEST a FREE Sllill ill FEES EBB v BBHESTTB 3- INTERNATIBHAL REIT BAT DELIVERY EBAY STYLE FEEDBACK SYSTEM I Listi Dam-ease twp still Freir'n a premetienal 'u'iislen released by Atlantis a drug sales site that uses telels lil-ce Tor and Eliteein tn hide users' identities The ad has since been remew'eisl Homeland You Tube Security a Investigations Law Enforcement Sensitive '0 SEC Homeland Security Investigations I-ISI Weapons Forums -- --1 7 apiuids 1 Silk Rnad Sho cate Handgunsism Flifles 5 Shotguns 2 Submeehine guns Accesseries Ammunitionf34 ExplasivesH 3J- ayj kreac L- -4 Plasic knife Guidesm 9-44 Nen Lethal 1 1 j mm 35 Magnum Federal JHP 1 E gr $1 1 96 Welcome The Armory nt L message-sift ordersm se 1 search MI I t News - The Armory opens for business - -- HulluwPu-km US Army Tactical Lights SEW Smith EL Wesson $2 36 I31 35 55 9mm BVAC 115 Grain 1000 $193 06 TASCD Pied Det Scope $1 01 x Homeland a w f Securlty eet Investigations became a seller I how does it work forums contact us Law Enforcement Sensitive 1 HSI's Investigative Approach to Crypto-Currencies 1 Build the capacity of field agents to identify virtual currency exchangers and online black markets 2 Exploit the financial angle and employ financial investigative tools in all HSI investigations to include cyber enabled crime 3 Coordinate Anti-Money Laundering regulations related to virtual currency with FinCEN and Treasury 4 Engage HSI International Operations Attaches to leverage international counterparts and multilateral organizations to create enforcement actions against and regulate virtual currency exchangers 5 Continue to enhance HSI's engagement with academia and subject matter experts in an effort to develop tools and capabilities to combat TCO's who hide behind online anonymity Law Enforcement Sensitive Homeland Security Investigations HSI The Real Exploit of Bitcoins Homeland i Security 3 Investigations Law EnforcementSensitive Homeland Security Investigations HSI Liberty Reserve Case Study let Liberty 1 4 am Create Account 9 Get protected by LrberlyGuard Reserve LibegtyGuard Featured Merchants Marketiva corn Popular Forex company lnstaforexcom Award winning forex Masterforexorg Award winning lorex Merchants Downloads Featured Exchange Semces Consumer Alert urn-centercom English Russian Fast and reliable service 24H e-Nairacom English Reputable exchanger located in Africa ExchangeZone com English in Blog Wholesale Exchange Services eCardOne com English Italian Spanish German Czech Author English Chinese Authorized wholesaler SwiftExchangercom English Official Liberty Reserve merchantr EQARTME Homeland -5 i ecurlty Investigations Law Enforcement Sensitive o Established in Costa Rica on May 8th 2006 by Arthur Budovsky and others o Centralized digital currency service that allowed users to register and transfer money to other users with only a name e-mail address and birth date No verification For 75$ cents the user can hide his her account information o Deposits made to third-parties exchangers located in Russia Nigeria and Vietnam using a credit card or bankwire among other deposit options NOT DIRECTLY to Liberty Reserve o Deposited funds were converted into Liberty Reserve Dollars or Liberty Reserve Euros which were tied to the value of the US dollar and the euro or to ounces of gold o No limits were placed on transaction sizes They charged a small fee about 1% on each transfer Offered shopping cart functionality and other merchant services Law Enforcement Sensitive The Merchants at Liberty Reserve o 19 of merchants involved in selling stolen credit card data or personal identification information o 7 Websites involved in fraudulent investment or gambling operations o 5 websites were privacy and security services used by cybercriminals o 2 websites were pre-paid credit debit card sites Law Enforcement Sensitive Dollar Amount of Liberty Reserve Activity o $6 Billion dollars laundered o 55 million transactions o 1 million users Law Enforcement Sensitive End Result Indictment charges the seven principal employees as well as Liberty Reserve itself with money laundering and operating an unlicensed money transmitting business The charges were leveled using a provision of the U S Patriot Act since Liberty Reserve was not an American company Law Enforcement Sensitive R GEM mfg Ira ax Homeland Security Investigations HSI Silk Road Case Study Silk Road marketplace Homeland Security Investigations Law Enforcement Sensitive What is Silk Road o Silk Road is a website located on the on an encrypted network Tor Founded by Ross William Ulbricht AKA Dread Pirate Robert DPR o The website is a digital black market that allows users to purchase illegal drugs using anonymity technology and utilizing a sophisticated user-feedback system like eBay o The only currency allowed on Silk Road to be exchanged for drugs contraband are bitcoins SR profited charging a fee for each transaction Law Enforcement Sensitive Who are the players on Silk Road Operators of Silk Road Admin and Mods SR Vendors SR Drug Users Buyers 150 000 User accounts on Silk Road 2012 Law Enforcement Sensitive Mt Gox Seizure - $5 032 921 o During the course of investigation Mt Gox was identified as the Silk Road money exchanger and conducting business as a Money Service Business MSB Mt Gox is the largest BTC Exchange 80% o Baltimore Silk Road Task Force executed 3 Federal seizure warrants Wells Fargo Bank and Dwolla o On May 9 2013 USSS Baltimore SR Task Force seized $2 117 414 o On May 14 2013 HSI Baltimore seized $2 915 507 Law Enforcement Sensitive Key Points regarding Silk Road o Estimated $1 2 billion in transactions on Silk Road o Over 950 000 user accounts registered o The largest trafficked website on Tor o All types of contraband were sold on SR Firearms explosives fraudulent IDs stolen CC info IPR Law Enforcement Sensitive Indictment of DPR On May 1 2013 JOHN DOE aka DREAD PIRATE ROBERTS was indicted in the by District of Maryland for Use of Interstate Commerce Facilities in Commission of Murder-for-Hire Conspiracy to Distribute a Controlled Substance Attempted Witness Murder Aiding and Abetting Still Ongoing Law Enforcement Sensitive Homeland Security Investigations Illicit Finance and Proceeds of Crime Unit The Exploitation of Interstate Funnel Accounts Interstate Funnel Account Evolution Dramatic increase of suspicious activity reports SARs concerning interstate funnel account usage o In 2008 banks filed approximately 1 000 SARs which denote funnel account activity in the U S o That figure steadily increased to over 15 188 SARs filed in 2011 o A check of SAR filings on funnel accounts in the past six months from November 2012 until May 2013 yielded over 12 000 results According to AML officials interstate funnel accounts are the second most generated SAR behind structuring Law Enforcement Sensitive Interstate Funnel Account Definition Interstate Funnel Account is defined as a bank account opened held by a nominee that receives cash deposits from an out of state unidentified third party that are readily available for withdrawal from the domiciled account Law Enforcement Sensitive Homeland Security Investigations I-ISI Interstate Funnel Account SAR Activity 0 Homeland Eur Security Em Investigations Law Enforcement Sensitive Benefits of Interstate Funnel Accounts Criminal Withdrawals Deposits lower organizations are free from denominations Rapid avoid narcotic smells More secure while movement of highway or residues than smuggled funds for little withdrawals cash airport and less likely to are for high or no cost parcel be identified denominations interdiction by K-9 Law Enforcement Sensitive Interstate Funnel Accounts Contacts Depositors Phone text message email etc Criminal Organization Account Manager Funds are ultimately transferred to Mexico BCS or wire transfer to further conspiracy Anonymous Depositor Straw Account Holder withdraws and delivers the funds to Account Manager Funnel Account Holder Law Enforcement Sensitive Anonymous Depositor Homeland Security Investigations HSI Gilberto Figueroa Rios Section Chief Financial Narcotics and Special Operations Division Illicit Finance and Proceeds of Crime Unit 500 12th St SW Washington DC 20536 Tel 202-732-5788 desk 202-271-8147 cell Gilberto figueroa-rios@ice dhs gov San Juan Field Office 787-729-6969 Law Enforcement Sensitive SECURI GATI ON 9MP rd ers rade' fwwr I                     National Security Archive    Suite 701  Gelman Library  The George Washington University    2130 H Street  NW  Washington  D C  20037    Phone  202 994‐7000  Fax  202 994‐7005  nsarchiv@gwu edu